The Financing of R&D and Innovation

Bronwyn Hall and Josh Lerner

No 15325, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: Evidence on the "funding gap" for investment innovation is surveyed. The focus is on financial market reasons for underinvestment that exist even when externality-induced underinvestment is absent. We conclude that while small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital, the evidence for high costs of R&D capital for large firms is mixed. Nevertheless, large established firms do appear to prefer internal funds for financing such investments and they manage their cash flow to ensure this. Evidence shows that there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets for VC exit are not highly developed. We conclude by suggesting areas for further research.

JEL-codes: G24 G32 O32 O38 (search for similar items in EconPapers)
Date: 2009-09
New Economics Papers: this item is included in nep-com, nep-ent, nep-ino, nep-ipr, nep-pr~, nep-ppm and nep-sbm
Note: CF IO PR
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (135)

Published as Financing R&D and innovation, with Josh Lerner, draft of chapter prepared for the Elsevier Handbook of the Economics of Innovation, B. H. Hall and N. Rosenberg (eds.), April 2010, pp. 609-639.

Downloads: (external link)
http://www.nber.org/papers/w15325.pdf (application/pdf)

Related works:
Chapter: The Financing of R&D and Innovation (2010)
Working Paper: The Financing of R&D and Innovation (2010)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:15325

Ordering information: This working paper can be ordered from
http://www.nber.org/papers/w15325

Access Statistics for this paper

More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().