Abstract
The aim of this chapter is to identify the different role of financial funds in traditional and R&D investments in Italian manufacturing firms using information from Capitalia’s latest Survey of Italian Firms. R&D, defined as a creative activity implemented to improve know-how and its utilization in new applications, is quite distinct because of its high rate of information opacity. Coherently with the asymmetric information theory, R&D thus implies that firms will have greater difficulty in finding external financial funding. The higher risk related to R&D projects could entail some form of financial constraint. However, signalling mechanisms such as self-financing could correct such a market imperfection.
Access this chapter
Tax calculation will be finalised at checkout
Purchases are for personal use only
Preview
Unable to display preview. Download preview PDF.
References
Aghion, P., Bond, S., Klemm, A., and Marinescu, I. (2004) “Technology and Financial Structure: are innovative enterprise different?” Journal of the European Economic Association, April-May, 2 (2–3), 277–288.
Atzeni, G., and Piga, C.A. (2007) “R&D Investment, Credit Rationing And Sample Selection” Bulletin of Economic Research 59 (2), 149–178.
Berger, A.N., and Udell, G.F. (1990) “Collateral, Loan Quality, and Bank Risk” Journal of Monetary Economics 25, 21–42.
Berger, A.N., and Udell, G.F. (1998) “The economics of small business finance: The roles of private equity and debt markets in the financial growth cycle” Journal of Banking & Finance 22, 613–673.
Bester, H. (1985) “Screening vs. Rationing in Credit Markets with Imperfect Information” American Economic Review 75, 850–855.
Bhattacharya, S., and Chiesa, G. (1995) “Proprietary Information, Financial Intermediation and Research Incentives” Journal of Financial Intermediation 4, 328–357.
Capitalia (2005) Osservatorio sulle Piccole e Medie Imprese, Indagine sulle imprese italiane, Roma.
Czarnitzki, D. (2002) Research and Development: Financial Constraints and the Role of Public Funding for Small and Medium-sized Enterprises, ZEW Discussion Paper No. 02-74.
Frank, M.Z., and Goyal, V.K. (2005) Trade-off and Pecking Order Theories of Debt, Working Paper, Center for Corporate Governance, Tuck School of Business at Dartmouth.
Gonas, J.S., Highfield, M.J., and Mullineaux, D.J. (2004) “When Are Commercial Loans Secured?” The Financial Review 39 79–99
Greene, W.H. (2003) Econometric Analysis, 5th edn., Prentice Hall, Inc., London.
Hall, B. H. (2002) “The Financing of Research and Development” Oxford Review of Economic Policy 18 (1), 35–51.
Harris, M., and Raviv, A. (1991) “The Theory of Capital Structure” The Journal of Finance 46 (1), 297–355.
Hellmann, T., and Stiglitz, J.E. (2000) “Credit and equity rationing in markets with adverse selection” European Economic Review 44, 281–304.
Herrera, A.M., and Minetti, R. (2007) “Informed finance and technological change: Evidence from credit relationships” Journal of Financial Economics 83, 223–269.
Himmelberg, C.P., and Petersen, B.C. (1994) “R & D and Internal Finance: A Panel Study of Small Firms in High-Tech Industries” The Review of Economics and Statistics 76 (1) (Feb), 38–51.
Ozkan, N. (2002) “Effects of financial constraints on research and development investment: an empirical investigation” Applied Financial Economics 12, 827–834.
Li, K., and Prabhala, N.R. (2006) Self-Selection Models in Corporate Finance, Working Paper, Center for Corporate Governance, Tuck School of Business at Dartmouth.
Modigliani, F., and Miller, M.H. (1958) “The cost of capital, corporation finance, and the theory of investment” American Economic Review 48, 261–297.
Meuleman, M., and De Maeseneire, W. (2008) Do R&D Subsidies Affect SMEs’ Access To External Financing?, Vlerick Leuven Gent Working Paper Series 2008/12.
Myers, S.C., and Majluf, N. (1984) “Corporate financing and investment decisions when enterprises have information that investors do not have” Journal of Financial Economics 13, 187–221.
Myers, S.C. (2003) “Financing of corporations” in Constantinides, G., Harris, M., and Stulz, R. (eds.) Handbook of The Economics of Finance: Corporate Finance 1A, Elsevier, North Holland, Amsterdam.
Zamarian, G.R., and Zaninotto, E. (2006) Assessing the economic impact of public industrial policies: an empirical investigation on subsidies, Proceedings of the Convention “EARIE 2006”, Amsterdam (NL), 25–28 August 2006.
Zellner, A. (1962) “An Efficient Method of Estimating Seemingly Unrelated Regressions (SUR) and Tests for Aggregation Bias” Journal of the American Statistical Association 57, 348–368.
Editor information
Editors and Affiliations
Copyright information
© 2010 Paola Brighi and Giuseppe Torluccio
About this chapter
Cite this chapter
Brighi, P., Torluccio, G. (2010). Traditional and R&D Investments: are They really Different?. In: Fiordelisi, F., Molyneux, P., Previati, D. (eds) New Issues in Financial Institutions Management. Palgrave Macmillan Studies in Banking and Financial Institutions. Palgrave Macmillan, London. https://doi.org/10.1057/9780230299153_5
Download citation
DOI: https://doi.org/10.1057/9780230299153_5
Publisher Name: Palgrave Macmillan, London
Print ISBN: 978-1-349-32591-7
Online ISBN: 978-0-230-29915-3
eBook Packages: Palgrave Economics & Finance CollectionEconomics and Finance (R0)