The Interdependence of R&D Activity and Debt Financing of Young Firms†

Helmut Fryges, Karsten Kohn and Katrin Ullrich

Journal of Small Business Management, 2015, vol. 53, issue S1, 251-277

Abstract: We investigate the interdependence of debt financing and & activities of young firms. Applying a bivariate Tobit model, we find that there is a positive interdependent relationship between the share of loan financing and & intensity. A higher share of loan financing allows for more & in young firms and, at the same time, a higher & intensity allows for a higher loan share. This result is mainly driven by start‐ups exhibiting high values of & intensity or leverage. Another remarkable result of our study is that the positive relationship between & and loan financing can only be detected if we consider that, first, the decisions on & and on loan financing are made simultaneously and, second, the decision on & impacts the decision on loan financing and vice versa.

Date: 2015
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DOI: 10.1111/jsbm.12187

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