Financial Contracting, R&D and Growth
This paper investigates the role of financial constraints in R&D races of the type used in Schumpeterian growth theory. In a world of perfect capital markets these models predict that all innovations come from industry outsiders. In reality, however, we observe a pronounced persistence of some dominant firms. We show that this persistence can be explained by constraints on financial contracting. The paper highlights an indirect channel through which agency costs reduce growth: due to agency costs incumbents face little competition from outsiders. Therefore they can afford to innovate less often and to ''rest longer on their laurels'', thereby retarding growth.
|Date of creation:||01 Oct 1998|
|Date of revision:||08 Dec 1999|
|Contact details of provider:|| Postal: |
Phone: +49 621 181 1776
Fax: +49 621 181 1774
Web page: http://www.vwl.uni-mannheim.de/gkEmail:
More information through EDIRC
When requesting a correction, please mention this item's handle: RePEc:xrs:gkwopa:1999-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helga Gebauer)
If references are entirely missing, you can add them using this form.