Capital Control, Debt Financing and Innovative Activity

Dirk Czarnitzki and Kornelius Kraft

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Abstract: The present paper discusses the effects of dispersed versus concentrated capital ownership on investment into innovative activity. While the market for equity capital might exert insufficient control on top managements' behavior, this weakness may be mitigated by a suitable degree of debt financing. We report the results of an empirical study on the determinants of innovative activity measured by patent applications. Using a large sample of German manufacturing firms, we find that companies with widely held capital stock are more active in innovation, i.e. weakly controlled managers show a higher innovation propensity. However, the higher the leverage the more disciplined the managers behave.

Keywords: C25; L11; O31; O32; Innovation; Patents; Corporate Governance; Limited Dependent Variables (search for similar items in EconPapers)
Date: 2009-04-02
Note: View the original document on HAL open archive server: https://hal.science/hal-00684396
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Citations: View citations in EconPapers (71)

Published in Journal of Economic Behavior and Organization, 2009, 71 (2), pp.372. ⟨10.1016/j.jebo.2009.03.017⟩

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Related works:
Journal Article: Capital control, debt financing and innovative activity (2009)
Working Paper: Capital Control, Debt Financing and Innovative Activity (2004)
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Persistent link: https://EconPapers.repec.org/RePEc:hal:journl:hal-00684396

DOI: 10.1016/j.jebo.2009.03.017

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