TY - JOUR
T1 - Financial sources OF R&D investment
AU - Martínez-Ros, Ester
AU - Tribó, Josep A.
PY - 2005
Y1 - 2005
N2 - This paper explores how firms finance their R&D projects. There are several instruments that can be used, however, due to information asymmetries and the combination of tangible and intangible returns that R&D projects generate, debt-financing is the worst alternative. The novelty of this paper is that it combines aspects of the resource-based view with those of the agency theory. This, in terms of a firm's decision making, is to consider that a firm's R&D investment is, on the one hand, partly determined by its financing resources and, on the other hand, a major determinant of its financial structure. The theoretical hypotheses are supported in the empirical study that makes use of a data sample of Spanish manufacturing firms for the period 1991-99. The main implication for managers that can be extracted from our study is that the most powerful financing incentive mechanism to stimulate R&D effort is to follow a deep pocket policy of internal funds accumulation.
AB - This paper explores how firms finance their R&D projects. There are several instruments that can be used, however, due to information asymmetries and the combination of tangible and intangible returns that R&D projects generate, debt-financing is the worst alternative. The novelty of this paper is that it combines aspects of the resource-based view with those of the agency theory. This, in terms of a firm's decision making, is to consider that a firm's R&D investment is, on the one hand, partly determined by its financing resources and, on the other hand, a major determinant of its financial structure. The theoretical hypotheses are supported in the empirical study that makes use of a data sample of Spanish manufacturing firms for the period 1991-99. The main implication for managers that can be extracted from our study is that the most powerful financing incentive mechanism to stimulate R&D effort is to follow a deep pocket policy of internal funds accumulation.
KW - Agency theory
KW - Financing instruments
KW - R&D investment
KW - Resource-based view
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M3 - Article
AN - SCOPUS:84888411366
SN - 1727-9232
VL - 3
SP - 191
EP - 202
JO - Corporate Ownership and Control
JF - Corporate Ownership and Control
IS - 2 B
ER -