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


Fryges, H and Kohn, K and Ullrich, K, The Interdependence of R&D Activity and Debt Financing of Young Firms, Journal of Small Business Management, 53, (S1) pp. 251-277. ISSN 0047-2778 (2015) [Refereed Article]

Copyright Statement

2015 International Council for Small Business

DOI: doi:10.1111/jsbm.12187


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.

Item Details

Item Type:Refereed Article
Keywords:innovation financing, capital structure, start-ups, KfW/ZEW Start-up Panel, Germany
Research Division:Economics
Research Group:Applied economics
Research Field:Industry economics and industrial organisation
Objective Division:Economic Framework
Objective Group:Microeconomics
Objective Field:Industrial organisations
UTAS Author:Fryges, H (Dr Helmut Fryges)
ID Code:99981
Year Published:2015
Web of Science® Times Cited:7
Deposited By:Australian Innovation Research Centre
Deposited On:2015-04-22
Last Modified:2018-03-07

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