Money for nothing: how firms have financed R&D-projects since the industrial revolution

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: We investigate the long-run historical pattern of R&D-outlays by reviewing aggregate growth rates and historical cases of particular R&D projects, following the historical-institutional approach of Chandler (1962), North (1981) and Williamson (1985). We find that even the earliest R&D-projects used non-insignificant cash outlays and that until the 1970s aggregate R&D outlays grew far faster than GDP, despite five well-known challenges that implied that R&D could only be financed with cash, for which no perfect market existed: the presence of sunk costs, real uncertainty, long time lags, adverse selection, and moral hazard. We then review a wide variety of organisational forms and institutional instruments that firms historically have used to overcome these financing obstacles, and without which the enormous growth of R&D outlays since the nineteenth century would not have been possible.

Keywords: R&D-project financing-history; R&D-financing institutions; sunk costs; historical R&D-project cost case studies; Britain; United States (search for similar items in EconPapers)
JEL-codes: N20 N80 O21 (search for similar items in EconPapers)
Date: 2013
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (25)

Published in Research Policy, 2013, 42(10), pp. 1793-1814. ISSN: 0048-7333

Downloads: (external link)
http://eprints.lse.ac.uk/51527/ Open access version. (application/pdf)

Related works:
Journal Article: Money for nothing: How firms have financed R&D-projects since the Industrial Revolution (2013)
Working Paper: Money for nothing: how firms have financed R&D-projects since the Industrial Revolution (2013)
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:ehl:lserod:51527

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager ().