R&D FINANCING AND GROWTH

Luca Spinesi and Mario Tirelli ()

No 249, Departmental Working Papers of Economics - University 'Roma Tre' from Department of Economics - University Roma Tre

Abstract: R&D investment are an important engine of growth and development.Yet economists have often claimed underinvestment, based on the consideration thatthese projects are more costly to finance, especially, due to the asymmetric informa-tion between inside and outside investors. Coherently, a recent empirical evidence hasshown that firms intensively active in R&D are less leveraged and rely more heavilyon internal finance. Motivated by this evidence, we study the e↵ects of asymmetricinformation and financial frictions within a GE economy of Schumpeterian tradition.The model and equilibrium concept are rich enough to represent investment and in-novation decisions, technology adoption/di↵usion through patent licensing and, mostimportantly, firms’ financial decisions. In this representation, R&D-intensive firmsmight e↵ectively rely more on internal sources and equity than on debt financing, rel-ative to what would happen in frictionless markets. Further, financial decisions a↵ectaggregate investment and income dynamics.

Keywords: Innovation; R&D; Schumpeterian growth; financial equilibrium; asym-metric information; firm financial structure (search for similar items in EconPapers)
JEL-codes: D25 D53 G32 O33 O34 O41 (search for similar items in EconPapers)
Pages: 37
Date: 2019-07
New Economics Papers: this item is included in nep-cfn, nep-fdg, nep-ino and nep-sbm
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Related works:
Journal Article: R&D financing and growth (2021)
Working Paper: R&D financing and growth (2018)
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Persistent link: https://EconPapers.repec.org/RePEc:rtr:wpaper:0249

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