Innovation, Trade, and Finance

Peter Egger and Christian Keuschnigg

American Economic Journal: Microeconomics, 2015, vol. 7, issue 2, 121-57

Abstract: Heterogeneous firms invest in R&D and expansion investment. Venture capital specializes in R&D financing where problems are largest. Marginal firms get funded by venture capital, while firms with larger debt capacity obtain cheaper bank financing. In the latestage, cash-rich firms invest at an optimal scale, while cash-poor firms are restricted. A country's financial and institutional development determines entry and expansion of firms and their comparative advantage in producing innovative goods. We illustrate how tariffs, R&D subsidies, institutional reform and venture capital improve access to capital, expand innovative industries, boost national welfare and may result in ambiguous international welfare spillovers. (JEL D21, F11, F13, G24, G32, O32)

JEL-codes: D21 F11 F13 G24 G32 O32 (search for similar items in EconPapers)
Date: 2015
Note: DOI: 10.1257/mic.20120032
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Citations: View citations in EconPapers (64)

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Related works:
Working Paper: Innovation, Trade, and Finance (2011)
Working Paper: Innovation, Trade, and Finance (2011)
Working Paper: Innovation, Trade and Finance (2010)
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