Retentions, relations and innovation: the financing of R&D in India

Sumit Majumdar

Economics of Innovation and New Technology, 2011, vol. 20, issue 3, 233-257

Abstract: Based on data for a panel of several thousand Indian firms covering a period of 15 years, between 1991-1992 and 2005-2006, this article has examined the impact of financial retentions and debt types on the levels of R&D undertaken by firms. Retentions by firms clearly influence firms' R&D spending levels. The results show that the important relational debt types, such as bank borrowing, corporate borrowings and deferred payments, have a positive and significant impact in influencing levels of R&D undertaken by firms in India. The economic impact of such debt in impacting R&D spending levels is also substantial. For Indian firms, where relational borrowings, especially from banks, have been very substantial, such borrowings have influenced their capability-building activities. Conversely, debt that is of the transactional variety has no material impact on firms' R&D spending levels. These results hold consistently across specifications and data stratification.

Keywords: financing; leverage; Indian industry; intangible assets; liberalization; R&D; relational debt; retentions; transactional debt (search for similar items in EconPapers)
Date: 2011
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Citations: View citations in EconPapers (4)

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DOI: 10.1080/10438590903516335

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