Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D BoomThe Journal of Finance (2009)
The financing of R&D provides a potentially important channel to link finance and economic growth, but there is no direct evidence that financial effects are large enough to impact aggregate R&D. U.S. firms finance R&D from volatile sources: cash flow and stock issues. We estimate dynamic R&D models for high-tech firms and find significant effects of cash flow and external equity for young, but not mature, firms. The financial coefficients for young firms are large enough that finance supply shifts can explain most of the dramatic 1990s R&D boom, which implies a significant connection between finance, innovation, and growth.
Publication DateJanuary, 2009
Citation InformationJames R. Brown, Steven M. Fazzari and Bruce C. Petersen. "Financing Innovation and Growth: Cash Flow, External Equity, and the 1990s R&D Boom" The Journal of Finance Vol. 64 Iss. 1 (2009) p. 971 - 984
Available at: http://works.bepress.com/james-brown/5/