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The Dynamics of Firm Growth: A re-examination
KTH, School of Industrial Engineering and Management (ITM), Industrial Economics and Management (Dept.), Economics. KTH, School of Industrial Engineering and Management (ITM), Centres, Centre of Excellence for Science and Innovation Studies, CESIS.ORCID iD: 0000-0002-5871-8571
2008 (English)Report (Other academic)
Abstract [en]

This article provides evidence that shed further light on the dynamic relationships between finance,physical investment, R&D, productivity and profit. Estimating relationships for 5,289 observations onSwedish manufacturing firms with 50 or more employees over the 1992-2000 periods, the followingsubstantial empirical findings emerge. First, physical investments are sensitive to both internal financing(profit) and external financing (expressed as leverage, or the ratio of debt over equity and debt) whileR&D is only weakly affected by the firm’s finance conditions. Second, no robust correlation betweenknowledge investments and ordinary investments can be established. Third, R&D has a strong effect onproductivity and profit. The reverse relationship is fragile and typically insignificant. The causalitybetween physical capital and productivity is bidirectional, while increased profit leads to more capital butnot the vise versa.

Place, publisher, year, edition, pages
CESIS, KTH Royal Institute of Technology , 2008. , 31 p.
CESIS Working Paper Series in Economics and Institutions of Innovation, 128
Keyword [en]
Financial constraints, R&D, Investments, Productivity, Panel data
National Category
URN: urn:nbn:se:kth:diva-72428OAI: diva2:487570
QC 20120208Available from: 2012-02-08 Created: 2012-01-31 Last updated: 2012-02-08Bibliographically approved

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