Internal vs External Financing of R&D

The empirical evidence suggests that while small firms in United States, United Kingdom and Canada rely on internal funds for financing R&D, similar firms in Japan, Germany and France have access to bank loans. In this paper, we analyze the financial decisions of small firms willing to invest in R&D. We find that their high ratio of intangible assets, along with the high risk nature of their investments, can explain their inability to raise debt in external capital markets. We also show that financing R&D with bank loans might be feasible, especially, if banks are willing to monitor the investment activities of their clients.     

The importance of equity finance for R&;D activity

This article analyzes the importance of equity finance for the R&D activity of small- and medium-sized enterprises. We use information on almost 6,000 German SMEs from a company survey. Using the intensity of banking competition at the district level as an instrument to control for endogeneity, we find that a higher equity ratio is conducive to a higher R&D intensity. Owners may only start R&D activities if they have the financial resources to sustain them until successful completion. We find a larger influence of the equity ratio for young companies. Equity may be more important for young companies which have to rely on the original equity investment of their owners since they have not yet accumulated retained earnings and can rely less on bank financing.     

Innovation success of non-R&;D-performers: substituting technology by management in SMEs

This paper investigates the impact of in-house R&D and innovation management practices on innovation success in small and medium-sized firms (SMEs). While there is little doubt about the significance of technology competence for generating successful innovations, in-house R&D activities may be a particular challenge for SMEs due to high risk exposure, high fixed costs, high minimum investment and severe financial constraints. SMEs may thus opt for refraining from R&D and relying more on innovation management tools in order to achieve innovation success. We analyse whether such a strategy can pay off. Based on data from the German CIS, we find that R&D activities are a main driver for innovation success if combined with external R&D, using external innovation sources or by entering into co-operation agreements. SMEs without in-house R&D can yield a similar innovation success if they effectively apply human resource management tools or team work to facilitate innovation processes.

R&;D investment and financing constraints of small and medium-sized firms

This study tests for financial constraints on R&D investment and how they differ from capital investment. To identify constraints in the access to external capital, we employ a credit rating index. Our models show that internal constraints, measured by mark-ups, are more decisive for R&D than for capital investment. For external constraints, we find a monotonic relationship between the level of constriction and firm size for both types of investment. Thus, external constraints turn out to be more binding with decreasing firm size. On the contrary, we do not find such monotonic relationships for internal constraints. Differentiation by firms’ age does not support lower constraints for older firms.     

Firm size and innovation

In an innovation survey in the Netherlands, we find considerably more SMEs which perform small scale R&D than are found in the official R&D surveys. Nonetheless, SMEs appear on average to be somewhat less R&D intensive than large firms. Only when we restrict our observations to firms which perform some R&D, there is no systematic relationship between size and R&D. Among the barriers to innovation the following are particularly important to SMEs: information deficits with respect to instruments of innovation policy; a lack of capital; a lack of management qualifications; problems in finding adequate technical information, and problems in finding qualified employees.     

Overcoming the double hurdles to investing in technology

Technological activities of small and medium-sized enterprises (SMEs) have received considerable attention from researchers and policy makers since the mid-1980s. Small firms could nurture entrepreneurship and facilitate the creation and application of new ideas. In spite of their potential in generating innovations, it is also observed that SMEs shy away from formal R&D activities, and the firm size itself seems to be a barrier for R&D activities. SMEs operating in developing countries face extra hurdles to investing in R&D. Given the massive share of SMEs, it becomes crucial to realize their developmental potential in developing countries. In this paper, we study the drivers of R&D activities in SMEs in Turkish manufacturing industries by using panel data at the establishment level for the 1993–2001 period. Our findings suggest that SMEs are less likely to conduct R&D, but if they overcome the first obstacle of conducting R&D, they spend proportionally more on R&D than the LSEs do. R&D intensity is higher in small than in large firms. Moreover, public R&D encourages firms to intensify their R&D efforts. The impact of R&D support is stronger for small firms.     

Technology and Export Decision

Taiwan has played an important role in international trade in the world and its manufacturing industries are dominantly composed of SMEs, yet little is known about the export decision of Taiwanese SMEs, especially the role of technology. This paper aims to explore the role of technology on the export decision of Taiwanese SMEs. In addition, whether there are differences in the determinants of the export decision for different groups of SMEs classified by size is also discussed. The empirical results show that the technological capability embodied in firms, measured by R&D, technology import, and training investment, do increase the probability of exporting. There does exist some variations in the determinants of exports between SMEs of different sizes. The impact of R&D is significantly positive on export propensity in all SMEs, while the role of technology imports and training investment are evidenced for only small firms, implying that external technological sources and other R&D-related activities are particularly important on the formation of technological capability for small firms.     

Determinants of R&D cooperation in small and medium-sized enterprises

We investigate the determinants of research and development (R&D) cooperation in small and medium-sized enterprises (SMEs). Using firm-level data from the 2002 Korean Innovation Survey and applying a probit model with sample selection, we find that incoming spillovers of knowledge have a significant and positive impact on SMEs?? decisions to engage in R&D cooperation. In particular, the effect of knowledge spillovers on R&D cooperation is much larger for smaller firms. Despite the importance of external knowledge for SMEs, the estimation results suggest that SMEs may be at a disadvantage in establishing external R&D linkages because of their absolute size limitations.     

Configurations of strategic R&D decisions and financial performance in small-sized and medium-sized firms

This paper links the strategic decisions made in R&D during the financially turbulent period of 2009 to the firm's financial health in the period 2010–2013. The focus is on decisions made in R&D-active small and medium-sized enterprises in terms of absorptive capacity, open innovation, type of R&D, and the organizational structuring of R&D. Based on a representative set of R&D-active firms in Belgium, qualitative comparative analysis reveals that the outcomes in terms of financial performance related to optimal configurations of strategic R&D decisions depend on the firm's size and on the time-lag under consideration. Managers in small-sized firms are advised to pay particular attention to a more functionally-structured R&D approach in configurations of strategic R&D decisions. To increase medium-term financial performance, managers in medium-sized firms benefit from more engagement in research-oriented activities, more in-house innovation, and the enhancement of absorptive capacity in sets of strategic R&D decisions.     

高管团队特征与企业创新关系的实证研究--以科技型中小企业为例

本研究以天津市科技型中小企业为样本，分析了当前我国科技型中小企业高管团队异质性、专业背景、受教育水平和团队规模与企业创新的关系。研究表明，高管团队受教育水平和团队规模与企业研发投入没有显著关系，而团队职业经历的异质性和成员专业背景则与企业创新呈显著负相关和正相关关系。     

The influence of R&D investment on the use of corporate venture capital: An industry-level analysis

We consider how internal research and development (R&D) influences the use of corporate venture capital (CVC) and how this relationship varies across industries. We find that, in general, R&D investments increase the number of CVC deals in an industry. We also find that R&D investment has a particularly strong influence on the use of CVC in industries that are growing rapidly and changing technologically. Our analysis provides greater clarity on the relationships involving R&D and CVC in the presence of contingencies by integrating insights of absorptive capacity and real options reasoning.     

Market-oriented institutional change and R&D investments: Do business groups enhance advantage?

Emerging market firms (EMFs) are increasingly relying on innovation to find their competitive advantage, but our understanding of how institutional change affects firm innovation has been limited. We analyzed Korean manufacturing firms from 1994 to 2006 to test the proposition that market-oriented institutional change in an emerging economy alleviates firms’ financing constraints and monitoring problems and improves the effectiveness of their innovation activities. Institutional evolution in the economy was found to affect Korean business groups and independent firms differently. Institutional change reduced the financing constraints on independent firms more than for business group affiliates in R&D investment. Independent firms, however, appeared less capable than group affiliates of translating the benefits of improved institutional environments into efficient R&D investment. This asymmetry may lead to a wider gap in the efficiency of R&D investment between business group affiliates and independent firms.     

Innovation and productivity in SMEs: empirical evidence for Italy

Innovation in SMEs exhibits some peculiar features that most traditional indicators of innovation activity do not capture. Therefore, in this paper, we develop a structural model of innovation that incorporates information on innovation success from firm surveys along with the usual R&D expenditures and productivity measures. We then apply the model to data on Italian SMEs from the “Survey on Manufacturing Firms” conducted by Mediocredito-Capitalia covering the period 1995–2003. The model is estimated in steps, following the logic of firms’ decisions and outcomes. We find that international competition fosters R&D intensity, especially for high-tech firms. Firm size and R&D intensity, along with investment in equipment, enhances the likelihood of having both process and product innovation. Both these kinds of innovation have a positive impact on firm’s productivity, especially process innovation. Among SMEs, larger and older firms seem to be less productive.

Capital structure decision making: A model for family business

Most theoretical and empirical studies of capital structure focus on public corporations. Only a limited number of studies on capital structure have been conducted on small-to-medium size enterprises (SMEs), and this deficiency is particularly evident in investigations into factors that influence funding decisions of family business owners.Theory indicates that there is a complex array of factors that influence SME owner-managers' financing decisions. Recent family business literature suggests that these processes are influenced by firm owners' attitudes toward the utility of debt as a form of funding as moderated by external environmental conditions (e.g., financial and market considerations).A number of other factors have been shown to influence financing decisions including culture; entrepreneurial characteristics; entrepreneurs' prior experiences in capital structure; business goals; business life-cycle issues; preferred ownership structures; views regarding control, debt–equity ratios, and short- vs. long-term debt; age and size of the firm; sources of funding for growth; attitudes toward debt financing; issues relating to independence and control; and perceived risk and attitudes toward personal risk.Although these factors have been identified, until now there does not appear to have been any attempts to develop empirically-based models that show relationships between these factors and family business owners' financing decisions. Utilizing theories derived from divergent disciplines, this study develops an empirically tested structural equation model of financing antecedents of family businesses. Participants of our study involved a random sample of 5000 business owners who were mailed a 250-item Australian Family and Private Business questionnaire developed specifically for this investigation.Notably, our findings reveal that firm size, family control, business planning, and business objectives are significantly associated with debt. Small family businesses and owners who do not have formal planning processes in place tend to rely on family loans as a source of finance. However, family businesses in the service industry (e.g., retailers and wholesalers) are less likely to use family loans as are those owners who are planning to achieve growth through new products or process development. Use of capital and retained profits is likely for family businesses planning to achieve growth through an increase in sales but less is likely for family businesses in the manufacturing sector and lifestyle firms. In addition, debt and family loans are negatively related to capital and retained profits. Equity is a consideration for owners of large businesses, young firms, and owners who plan to achieve growth through increasing profit margins. However, equity is less likely to be a consideration for older family business owners and owners who have a preference for retaining family control.Our findings suggest that the interplay between multiple social, family, and financial factors is complex. In addition, our findings indicate the importance of utilizing theories that also help to explain behavioral factors (e.g., owners' needs to be in control) that affect financial structure decision-making processes. Practitioners and researchers should consider the dynamic interplay among business characteristics (e.g., size or industry), behavioral aspects of business financing (e.g., business objectives), and financial factors (e.g., gearing levels) when working with and researching family enterprises.     

Internal Versus External R&D: A Study of R&D Choice with Sample Selection

This paper extends previous analyses of the choice between internal and external R&D to consider the costs of internal R&D. The Heckman two-stage estimator is used to estimate the determinants of internal R&D unit cost (i.e. cost per product innovation) allowing for sample selection effects. Theory indicates that R&D unit cost will be influenced by scale issues and by the technological opportunities faced by the firm. Transaction costs encountered in research activities are allowed for and, in addition, consideration is given to issues of market structure which influence the choice of R&D mode without affecting the unit cost of internal or external R&D. The model is tested on data from a sample of over 500 UK manufacturing plants which have engaged in product innovation. The key determinants of R&D mode are the scale of plant and R&D input, and market structure conditions. In terms of the R&D cost equation, scale factors are again important and have a non-linear relationship with R&D unit cost. Specificities in physical and human capital also affect unit cost, but have no clear impact on the choice of R&D mode. There is no evidence of technological opportunity affecting either R&D cost or the internal/external decision.     

The Interdependence of R&D Activity and Debt Financing of Young Firms

We investigate the interdependence of debt financing and R&D activities of young firms. 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 result is mainly driven by start‐ups exhibiting high values of R&D intensity or leverage. Another remarkable result of our study is that the positive relationship between R&D and loan financing can only be detected if we consider that, first, the decisions on R&D and on loan financing are made simultaneously and, second, the decision on R&D impacts the decision on loan financing and vice versa.     

Access to finance,working capital management and company value: Evidences from Brazilian companies listed on BM&FBOVESPA

In this research, we have analyzed the impact of financial leverage on the relationship between working capital and company value and how financial constraints on access to financing affect this relationship. In addition, we have analyzed the relationship between working capital and company value. Using a sample of Brazilian public companies listed on BM&FBOVESPA from 1995 through 2009, we found evidence for the following conclusions: an extra Real (R$) of investment in working capital is significantly less worth, on average, than an extra Real (R$) of investment in cash; and, on average, increasing the level of working capital at the beginning of a fiscal year reduces company value.     

The impact of public R&D subsidy on small firm productivity: evidence from Korean SMEs

This paper explores the effects of R&D promotion policy on SME performance. We use a large panel data set on public R&D subsidies to Korean manufacturing firms. We control for counterfactual outcomes employing the DID (difference in differences) estimation procedure as well as for the endogeneity of the R&D investment and the R&D subsidy using the 2-stage Tobit/Logit DPD (dynamic panel data) procedure. We find significant evidence for positive effects of the public R&D subsidy on both the R&D expenditure and the value added productivity of Korean manufacturing SMEs. The policy thus appears to have been successful in fostering technological advancement and in promoting economic growth.     

Steuerliche Förderung von Forschung und Entwicklung in KMU — Irrweg für Deutschland?

To foster R&D activities, German industry lobbyists and policymakers are discussing the introduction of tax incentives for R&D in small and medium enterprises (SME) — all the more because Germany is one of just six of the 35 OECD members without indirect R&D support. Based on a critical assessment of the arguments provided, we conclude that international experiences with R&D tax incentives are not as promising as often suggested. An appropriate transfer into the German tax system, considering its specificities, appears to be technically difficult. The high level of heterogeneity of German SMEs population suggests that not every SME requires R&D to be innovative, because empirical evidence shows multiple diverse innovation patterns that demand other forms of support. Acknowledging the existing range of SMEs, we propose that instead of introducing R&D tax incentives, the debate should be focused on how to strengthen and develop the existing innovation policy mix for SMEs.     

R&D investment of start-up firms: does founders’ human capital matter?

This article examines whether founders’ human capital affects not only actual investment but also required investment in research and development (R&D), using the original data of Japanese start-up firms. The estimation results indicate that higher levels of founders’ human capital, especially their education levels, increase both actual and required investment in R&D and thus do not necessarily contribute to reducing the funding gap for R&D.