Corporate Research and Development in the UK: Spillovers and Credit Market Failure

Jonathan Seaton and Ian Walker

CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm

Abstract: This paper is concerned with testing for two related sources of market failure in UK R&D funding. First, there is a possibility of some credit market failure implying that there are some additional costs associated with external finance and that these costs are higher for R&D intensive firms. If this premium is high for such firms then the internal credit market created through retained profits becomes the more attractive source of funding. Second, we are concerned to test for the possibility that R&D is depressed by spillovers whereby the R&D activity of one firm affects the R&D decisions of another. The novelty of the paper lies in the use of UK microdata of quoted company accounts to estimate a model which allows for financial effects. The paper uses an empirical model of the financial decisions of firms to control for the bias associated with the endogeneity of the financial vairables in the R&D model. The findings suggest that spillovers may be relatively unimportant. However, even after controlling for its endogeneity, the analysis does suggest that the source of financing for the firm has real effects on R&D activity and this suggests credit market failure compounds the direct market failure associated with spillovers.

Date: 1993-10
References: Add references at CitEc
Citations:

There are no downloads for this item, see the EconPapers FAQ for hints about obtaining it.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:san:crieff:9310

Access Statistics for this paper

More papers in CRIEFF Discussion Papers from Centre for Research into Industry, Enterprise, Finance and the Firm Department of Economics, Castlecliffe, The Scores, St Andrews, KY16 9AZ. Contact information at EDIRC.
Bibliographic data for series maintained by Department of Economics, The University of St Andrews Business School ().