Equity financing and innovation: Is Europe different from the United States?
2010 (English)In: Journal of Banking & Finance, ISSN 0378-4266, Vol. 34, no 6, 1215-1224 p.Article in journal (Refereed) Published
During the mid and late 1990s young, high-tech firms in the U.S. experienced a supply shift in both internal and external equity fueling a finance-driven boom in corporate R&D. This paper examines whether R&D spending in Europe in a similar way was sensitive to fluctuations in the supply of internal and external equity during the late 1990s and early 2000s. I conjecture that U.K. and Continental Europe, due to their different financial systems, differ in terms of equity supply. I estimate dynamic R&D regression models for U.K. and Continental European high-tech firms separately and find significant joint cash-flow effects for newly listed firms in both samples. However, only new firms in the U.K. experienced a joint external equity effect as well. The findings of this paper suggest a channel through which market-based financial systems outperform the bank-based economies of Continental Europe.
Place, publisher, year, edition, pages
2010. Vol. 34, no 6, 1215-1224 p.
Financing constraints, R&D, Stock issues, Financial markets
Economics and Business
IdentifiersURN: urn:nbn:se:kth:diva-25084DOI: 10.1016/j.jbankfin.2009.11.015ISI: 000277673100009ScopusID: 2-s2.0-77950020290OAI: oai:DiVA.org:kth-25084DiVA: diva2:355700
QC 201010082010-10-082010-10-072011-01-04Bibliographically approved