The interdependence of R&D activity and debt financing of young firms

Helmut Fryges, Karsten Kohn and Katrin Ullrich (katrinullrich.mail@gmail.com)

No 12-016, ZEW Discussion Papers from ZEW - Leibniz Centre for European Economic Research

Abstract: We investigate the interdependence of debt financing and R&D activities of young firms. Using micro-level data of the KfW/ZEW Start-up Panel, our estimation results show that firm characteristics are more important than personal characteristics of the founders for explaining young firms' leverage, whereas firm characteristics and human capital of both founders and employees heavily influence R&D intensity. Applying a bivariate Tobit model, we find that there is a positive interdependent relationship between the share of loan financing and R&D intensity. A higher share of loan financing allows for more R&D in young firms and, at the same time, a higher R&D intensity allows for a higher loan share. This relationship cannot be detected by merely estimating single-equation models for R&D intensity and debt financing.

Keywords: innovation financing; capital structure; start-ups; KfW/ZEW Start-up Panel; Germany (search for similar items in EconPapers)
JEL-codes: G32 L26 O32 (search for similar items in EconPapers)
Date: 2012
New Economics Papers: this item is included in nep-cse, nep-ent, nep-ino and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Related works:
Working Paper: The Interdependence of R&D Activity and Debt Financing of Young Firms (2011)
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Persistent link: https://EconPapers.repec.org/RePEc:zbw:zewdip:12016

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