Financing Innovation in New Small Firms: New Evidence from Canada

Valerie Gaudreault, Guy Gellatly and John Baldwin

Analytical Studies Branch Research Paper Series from Statistics Canada, Analytical Studies Branch

Abstract:

This paper investigates the financial characteristics of new small firms. The analysis develops a representative, small-firm financial profile and evaluates the extent to which the proportionate use of different instruments and sources is correlated with industry-level and firm-specific characteristics. Multivariate methods are then used to examine relationships among financial structure, R&D intensity, and innovation.

Our results suggest that relationships between knowledge intensity and capital structure are bidirectional. After a range of industry- and firm-level covariates are controlled for, firms that devote a higher percentage of their investment expenditure to R&D also exhibit fewer debt-intensive structures. Conversely, debt-intensive structures also act to constrain investments in R&D. These relationships, however, depend upon the type of debt in the asset mix. It is the share of long-term debt to total assets that is negatively related to investments in knowledge.

Keywords: Business performance and ownership; Financial statements and performance; Small and medium-sized businesses (search for similar items in EconPapers)
Date: 2002-05-24
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (27)

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Persistent link: https://EconPapers.repec.org/RePEc:stc:stcp3e:2002190e

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