Financial Constraint and R&D Investment: Evidence from CIS

Amaresh K. Tiwari, Pierre Mohnen, Franz C. Palm and Sybrand Schim Loeff

Chapter 10 in Determinants of Innovative Behaviour, 2008, pp 217-242 from Palgrave Macmillan

Abstract: Abstract The connection between finance and investment starts with any violation of the Modigliani-Miller theorem (Modigliani and Miller, 1958), usually modelled formally via imperfect information. According to Ross, Westerfield and Jordan (1993) about 80 per cent of all financing is done with internally generated funds. Explanations for this behaviour usually highlight the role of information asymmetries (Myers and Majluf, 1984) and agency issues ( Jensen and Meckling, 1976) in raising the costs of external funds.

Keywords: Cash Flow; Financial Constraint; Optimal Contract; Link Internal; External Organization (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1057/9780230285736_10

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