The importance of equity finance for R&D activity

Small Business Economics - Tập 33 - Trang 303-318 - 2008
Elisabeth Müller1, Volker Zimmermann2
1Industrial Economics and International Management, Centre for European Economic Research (ZEW), Mannheim, Germany
2Economic Research, KfW Bankengruppe, Frankfurt am Main, Germany

Tóm tắt

This article analyzes the importance of equity finance for the R&D activity of small- and medium-sized enterprises. We use information on almost 6,000 German SMEs from a company survey. Using the intensity of banking competition at the district level as an instrument to control for endogeneity, we find that a higher equity ratio is conducive to a higher R&D intensity. Owners may only start R&D activities if they have the financial resources to sustain them until successful completion. We find a larger influence of the equity ratio for young companies. Equity may be more important for young companies which have to rely on the original equity investment of their owners since they have not yet accumulated retained earnings and can rely less on bank financing.

Tài liệu tham khảo

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