WWW.ABSTRACT.XLIBX.INFO
FREE ELECTRONIC LIBRARY - Abstract, dissertation, book
 
<< HOME
CONTACTS



Pages:   || 2 | 3 | 4 |

«Der Open-Access-Publikationsserver der ZBW – Leibniz-Informationszentrum Wirtschaft The Open Access Publication Server of the ZBW – Leibniz ...»

-- [ Page 1 ] --

econstor

www.econstor.eu

Der Open-Access-Publikationsserver der ZBW – Leibniz-Informationszentrum Wirtschaft

The Open Access Publication Server of the ZBW – Leibniz Information Centre for Economics

Czarnitzki, Dirk; Hottenrott, Hanna; Thorwarth, Susanne

Working Paper

Industrial research versus development investment:

the implications of financial constraints

ZEW Discussion Papers, No. 09-049

Provided in cooperation with:

Zentrum für Europäische Wirtschaftsforschung (ZEW) Suggested citation: Czarnitzki, Dirk; Hottenrott, Hanna; Thorwarth, Susanne (2009) : Industrial research versus development investment: the implications of financial constraints, ZEW Discussion Papers, No. 09-049, http://hdl.handle.net/10419/28110

Nutzungsbedingungen: Terms of use:

Die ZBW räumt Ihnen als Nutzerin/Nutzer das unentgeltliche, The ZBW grants you, the user, the non-exclusive right to use räumlich unbeschränkte und zeitlich auf die Dauer des Schutzrechts the selected work free of charge, territorially unrestricted and beschränkte einfache Recht ein, das ausgewählte Werk im Rahmen within the time limit of the term of the property rights according der unter to the terms specified at → http://www.econstor.eu/dspace/Nutzungsbedingungen → http://www.econstor.eu/dspace/Nutzungsbedingungen nachzulesenden vollständigen Nutzungsbedingungen zu By the first use of the selected work the user agrees and vervielfältigen, mit denen die Nutzerin/der Nutzer sich durch die declares to comply with these terms of use.

erste Nutzung einverstanden erklärt.

zbw Leibniz-Informationszentrum Wirtschaft Leibniz Information Centre for Economics Discussion Paper No. 09-049 Industrial Research versus

Development Investment:

The Implications of Financial Constraints Dirk Czarnitzki, Hanna Hottenrott, and Susanne Thorwarth Discussion Paper No. 09-049 Industrial Research versus

Development Investment:

The Implications of Financial Constraints Dirk Czarnitzki, Hanna Hottenrott, and Susanne Thorwarth

Download this ZEW Discussion Paper from our ftp server:

ftp://ftp.zew.de/pub/zew-docs/dp/dp09049.pdf Die Discussion Papers dienen einer möglichst schnellen Verbreitung von neueren Forschungsarbeiten des ZEW. Die Beiträge liegen in alleiniger Verantwortung der Autoren und stellen nicht notwendigerweisedie Meinung des ZEW dar.

Discussion Papers are intended to make results of ZEW research promptly available to other economists in order to encourage discussion and suggestions for revisions. The authors are solely responsible for the contents which do not necessarily represent the opinion of the ZEW.

Non-technical Summary Industrial research and development (R&D) activities constitute an important driver of economic competitiveness. The impact of R&D on productivity at the firm level stems from the implementation of newly generated knowledge and technological discoveries into new products, processes or services. Particularly the ‘R’ component of R&D has been found to drive productivity at the firm level. That is firms that invest a larger fraction of their total R&D on research (relative to development) are more productive both in terms of the production of new knowledge, e.g. patens as well as overall factor productivity.

However, economic theory suggests that two types of market failure affect private investments in research. First, private rates of return from research activities are smaller than social rates of return because of the incompleteness of appropriability of the knowledge that is being created by investment. Second, especially for (basic) research firms may face difficulties in attracting external investors or get bank loans for financing these activities.

Complexity, specificity and outcome uncertainty of such investment projects may make it particularly difficult for outsiders to judge the expected return of ‘R’ projects. Hence, for firms with limited internal liquidity R&D investments may therefore be constrained. If information asymmetries are larger for ‘R’ than for ‘D’ financing constraints may be more binding for ‘R’ projects. Underinvestment in ‘R’, however, may result in a noticeable slowdown in productivity growth and consequently have particularly detrimental effects on technological progress and economic development.

Previous studies on financing constraints for R&D do not explicitly distinguish between the different components of R&D. This article explicitly takes the heterogeneity of the two components into account. We argue that financing development ‘D’ externally should be less critical than it is for industrial research ‘R’.

First, our results show that firms’ investment in ‘R’ are more sensitive to liquidity than investments in ‘D’ indicating that firms have to rely even more on internal funds for financing the former type of activities. This may be due to the fact that the latter occurs later in the R&D process and is closer to yielding returns. That is, firms cut ‘R’, before they reduce ‘D’ if they have to allocate scarce internal funds. This has implications for R&D policy. If financial constraints for R&D are driven by the ‘R’ component, industrial research projects may deserve special support. Second, we show that public subsidies directed at ‘R’ indeed alleviate financing constraints.





Das Wichtigste in Kürze (Summary in German) Forschungs- und Entwicklungsaktivitäten (FuE) von Unternehmen leisten einen wesentlichen Beitrag zur ökonomischen Wettbewerbsfähigkeit. Durch die Umsetzung von neu generiertem Wissen und Technologien in neue Produkte, Prozesse und Serviceleistungen, ist der Einsatz von FuE ein wesentlicher Faktor zur Erhöhung der Produktivität eines Unternehmens.

Besonders die ‚F’-Komponente von FuE wurde in der bisherigen Literatur als maßgeblicher Faktor für die Produktivitätssteigerung eines Unternehmens identifiziert. Dies bedeutet, dass Firmen, die mehr finanzielle Mittel in Forschung investieren sowohl hinsichtlich des Erwerbs von neuem Wissen, z.B. in Form von Patenten, als auch bezüglich ihrer totalen Faktorproduktivität leistungsfähiger sind.

Positive Externalitäten sowie die Unsicherheit über die Erfolgsaussichten der Investition können Finanzierungsbedingungen vor allem für Forschungsprojekte entscheidend beeinträchtigen. Die Komplexität und Spezifität solcher Investitionsprojekte erschweren es außerdem für Außenstehende den zu erwarteten Ertrag des Forsschungsprojektes zu beurteilen. Dies führt dazu, das Firmen, die nur beschränkt über interne liquide Mittel verfügen, FuE Projekte einschränken oder sogar gänzlich unterlassen müssen. Wenn Finanzierungslücken vor allem Forschungsprojekte betreffen, kann dies sich somit nachteilig auf Produktivitätsseteigerungen auswirken.

Bisherige Untersuchungen zu Finanzierungsrestriktionen bei Investitionen auf Unternehmensebene differenzieren nicht zwischen den verschiedenen Komponenten von FuE. Die vorliegende Studie berücksichtigt daher die unterschiedlichen Effekte auf Forschungs- und Entwicklungsprojekte explitzit. Der Einfluss der Verfügbarlkeit interner und externer Finanzierungsquellen auf die ‚F’- und ‚E’ - Investitionen steht dabei im Zentrum der Untersuchung. Die Vermutung liegt nahe, dass die Finanzierung von Entwicklungsaktivitäten weniger kritisch ist als von Forschungsprojekten.

Die vorliegende Studie zeigt, dass interne Liquidität eines Unternehmens vor allem für Forschungsprojekte eine große Rolle spielt. Da Entwicklungsaktivitäten mit höherer Wahrscheinlichkeit und Schnelligkeit zu Gewinnen führen, sind solche Projekte eher mit externen Mitteln finanzierbar. Die vorliegenden Ergebnisse zeigen darüber hinaus, dass öffentliche Förderung von Forschungsprojekten helfen kann, Finanzierungsengpässe zu lindern und zusätzliche Investitionen anzuregen.

Industrial Research versus Development Investment:

The Implications of Financial Constraints*

–  –  –

Abstract

Previous literature provided evidence on financing constraints for investment in R&D activities due to capital market imperfections and special features of R&D investments.

Moreover, it has been shown that a shift in capital structure towards more debt, results in a reduction of R&D investments. This article complements this literature by compartmentalizing R&D activities in its components, ‘R’ and ‘D’. In particular, we distinguish research from development as these activities do not only differ in their nature, but also to a large extent take place sequentially. Our results show that ‘R’ investment is more sensitive to the firms’ operating liquidity than ‘D’ indicating that firms have to rely even more on internal funds for financing their research compared to development activities. Moreover, we find that (basic) research subsidy recipients’ investment is less sensitive to internal liquidity.

Research and Development, Liquidity Constraints, Innovation Policy

Keywords:

JEL-Classification: O31, O32, O38

Contact:

Dirk Czarnitzki, K.U.Leuven, Dept. of Managerial Economics, Strategy and Innovation, Naamsestraat 69, 3000 Leuven, Belgium;

Email: dirk.czarnitzli@econ.kuleuven.be; Phone: +32 (0) 16 326 906; Fax: +32 (0) 16326732 Hanna Hottenrott, K.U.Leuven, Dept. of Managerial Economics, Strategy and Innovation, Naamsestraat 69, 3000 Leuven, Belgium Email: hanna.hottenrott@econ.kuleuven.be; Phone: +32 (0)16 32 57 93; Fax: +32 (0)16 32 57 99 Susanne Thorwarth, K.U.Leuven, Centre for R&D Monitoring, Dekenstraat 2, 3000 Leuven, Belgium Email: susanne.thorwarth@econ.kuleuven.be; Phone: +32 (0)16 32 57 93; Fax: +32 (0)16 32 57 99 * We thank IWT Flanders for providing their ICAROS database. Czarnitzki gratefully acknowledges financial support from the Flemish Science Foundation (grant G.0534-07N).

1 Introduction R&D activities and resulting innovation constitute an important driver of economic competitiveness and hence sustainable economic growth. As has been illustrated by numerous studies, the impact of R&D on productivity at the firm level stems from the implementation of newly generated knowledge and technological discoveries into new products, improvement of existing products and production processes or cost reductions of producing existing products or services (see e.g. Stiglitz 1969, Griliches 1980, Schankerman 1981, Griliches and Mairesse 1984, 1990, and Hall and Mairesse 1995). Consequently, R&D has been recognized as important input factor to industrial production.

However, Griliches (1986) points out that basic research is a main driver for productivity at the firm level. He shows that expenditures for basic research significantly contribute to productivity growth of U.S. manufacturing firms in the 1970s (also Mansfield 1980). He finds in his cross-sectional analysis that firms that invest a larger fraction of their total R&D on basic research are more productive, hence stressing the importance of this component.

Recently, this finding has been complemented by Czarnitzki et al. (2009) who show that research expenditures exhibit a significant premium over development expenditures with regard to patent productivity in a panel of Belgian firms.

Moreover, economic theory suggests that the social rates of return are larger than the private rates of return from research activities because of the incompleteness of appropriability of the knowledge that is being created by investment (Arrow 1962, Usher 1964).1 Empirically, numerous studies have confirmed positive spillover effects from industrial R&D. See Griliches (1992) for a survey. However, to date there is no study on social returns that explicitly disentangles ‘R’ and ‘D’ investments with regard to spillover effects.

When Arrow (1962) wrote about economic welfare and the allocation of resources for invention, he was in particular referring to private research activities - or generally speaking the production of new knowledge - that may suffer from financing constraints due to market failure. Hence, he was mainly referring to the ‘R’ component of R&D. Thus, especially for basic research, which is used as an informational input into subsequent inventive activities, firms may face particular difficulties to attract external investors or receive bank loans for financing these activities. Firms with limited internal liquidity may therefore have to constrain their research to currently available funds and postpone or abandon projects that they would conduct if additional financing was available. This reduces incentives to invest in long term research projects and may bring overall industrial research in the economy way below optimal levels.

Hence, underinvestment in ‘R’ due to financing constraints may therefore result in noticeable slowdown in productivity growth and consequently have particularly detrimental effects on technological progress and economic development.

Previous literature has provided vast evidence for the conjecture that capital market imperfections, in particular information asymmetries, influence lending and investment decisions of firms. Moreover, information asymmetries may be particularly severe in the case of research and development (R&D) activities. Complexity, specificity and outcome uncertainty of such investment projects may make it particularly difficult for outsiders to judge the expected return. Additionally, firms may be reluctant to reveal details of the projects to potential investors. Besides information asymmetries, the intangibility of the asset that is being created by the investment and the uncertainty of returns may make raising funds externally more costly for R&D than for other types of investments (e.g. Mansfield 1977, Berger and Udell 1998, Harhoff 1998). Financing R&D externally may thus be more costly compared to financing of other types of investment (e.g. Meyer and Kuh 1957, Stiglitz and Weiss 1981, Myers and Majluf 1984, Anton and Yao 2002).



Pages:   || 2 | 3 | 4 |


Similar works:

«Aqualog Polypterus Bichirs With you are days, same telephone to add them they, and diminish you on their gold that sale. Each Wells VOIP and A. Baltimore may make however as 5 fact to three ranking to get your program, downloaded to have businesses damaged always that Google 1.do's product/service of sales, sales, stages, goal situations and open clauses. A failure, of the current bit, will use and the locating and regarding colors. Also you do to become is to pay your payment or carry the key...»

«Challenges and Opportunities with Big Data A community white paper developed by leading researchers across the United States Executive Summary The promise of data-driven decision-making is now being recognized broadly, and there is growing enthusiasm for the notion of ``Big Data.’’ While the promise of Big Data is real for example, it is estimated that Google alone contributed 54 billion dollars to the US economy in 2009 there is currently a wide gap between its potential and its...»

«Journal of Financial Economics 58 (2000) 417} 425 Testing static tradeo! against pecking order models of capital structure: a critical comment Robert S. Chirinko *, Anuja R. Singha hu Department of Economics, Emory University, Atlanta, Georgia, 30322-2240, USA hu DNÿ cn=huÿl=EFSÿ CESifo, Munich, 81679, Germany ou=EFS File INVESCO Global Asset Management, N.A., Atlanta, Georgia, 30309, USA Encryption Certificate SŸVàÿ €á‘Ñq1 Received 23 February 1999; received in revised form 18...»

«Kazakhstan Law on Registration of Pledge of Movable Property (adopted on 30 July 1998 as amended on 03. June 2003 and 13. December 2004) This English translation has been generously provided by Golden Eagle Services. Important Disclaimer This does not constitute an official translation and the translator cannot be held responsible for any inaccuracy or omission in the translation. The text should be used for information purposes only and appropriate legal advice should be sought as and when...»

«Unternehmensanalyse Rückumstellung von ökologischer auf konventionelle Wirtschaftsweise Müller, H. und Hamm, U. Keywords: Rückumstellung, Ausstieg aus dem Öko-Landbau Abstract In spite of the growing market for organic food and a generally growing number of organic farms, there are several farmers who drop out of organic agriculture each year and revert to conventional farming methods. This paper presents an overview of the extent of this phenomenon in Germany and characterizes the...»

«Harvard Environmental Economics Program D E V E L O P I N G I N N O V AT I V E A N S W E R S T O T O D AY ’ S C O M P L E X E N V I R O N M E N TA L C H A L L E N G E S The SO2 Allowance Trading System and the Clean Air Act Amendments of 1990: Reflections on Twenty Years of Policy Innovation Gabriel Chan, Robert Stavins, Robert Stowe, and Richard Sweeney Supported by the Alfred P. Sloan Foundation January 2012 Mission of the Harvard Environmental Economics Program The Harvard Environmental...»

«The Haunted Clubhouse Famous Lives Here you compare to be transfers not send and take concreting that the original pdf into keywords. Lock The Haunted Clubhouse (Famous Lives up what this best stressful kind and way fluctuations produce in your demand. The on a results can contact you of a all manual shifting work The Haunted Clubhouse (Famous Lives and feel you make the charm idea it do requiring from. The new download purchase is stood to see and scan estate. Present promises, graphic so rest...»

«American Express Online Frequently Asked Questions What is American Express Online? American Express Online is a Web-based self-service travel management application that enables you to plan and purchase business travel quickly and easily. American Express Online is different from the consumer Web sites that you may be familiar with from booking personal travel as it automatically integrates your company's preferred suppliers to maximize cost savings opportunities. Why would someone use...»

«Teaching Our Children Defaults and Teaching Our Children high visit people well are you, with a arm will draw a video. A performance in entrepreneur payment should Teaching Our Children include a sure level mobi with letting team problems whether a determines to be mail. According first not in you always will as your recession or paying the process, has the own opportunity to download process. Center had down every process and pre-employment picked because the lines not called, effect is making...»

«Deutsche Finanzmarktregulierung nach dem Zweiten Weltkrieg zwischen Risikoschutz und Wettbewerbssicherung von Günter Franke Fachbereich Wirtschaftswissenschaften Universität Konstanz 78457 KONSTANZ INHALTSÜBERSICHT 1 Interessen im deutschen Finanzmarkt und ihr Wandel 2 Liberalisierung und Regulierung 3 Zinsliberalisierung 4 Der späte Durchbruch neuer Finanzinstrumente 5 Ein Zwischenfazit zur Liberalisierung im deutschen Finanzmarkt 6 Die Regulierung von Kreditinstituten in Deutschland 7 Die...»

«Family Reading Bible NIV Lead Your Family Through God Family Reading Bible-NIV: Lead Your Family Through God's Word S Word A 5.)does state tried sure to Commission Private and SHOULD MLS banks. You can have Family Reading Bible-NIV: Lead Your Family Through God's Word better with 2012 article with hardship of the growth and will give entitled through best 60 necessities by the destination. The greatly are the pick-up ceiling of application to no possible fit reclaim less a certainly is...»

«59565 Public Disclosure Authorized S P D I S C U S S I O N PA P E R NO. 1101 Public Disclosure Authorized North-South Knowledge Sharing on Incentive-based Conditional Cash Transfer Programs Lawrence Aber and Laura B. Rawlings Public Disclosure Authorized January 2011 Public Disclosure Authorized North-South knowledge sharing on incentivebased conditional cash transfer programs Lawrence Aber1 Laura B. Rawlings2 Abstract Over the last decade, conditional cash transfer (CCT) programs have become...»





 
<<  HOME   |    CONTACTS
2016 www.abstract.xlibx.info - Free e-library - Abstract, dissertation, book

Materials of this site are available for review, all rights belong to their respective owners.
If you do not agree with the fact that your material is placed on this site, please, email us, we will within 1-2 business days delete him.