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Title:The Importance of Equity Finance for R&D Activity: Are There Differences Between Young and OldCompanies? PDF Logo
Authors:Mueller, Elisabeth
Zimmermann, Volker
Issue Date:2006
Series/Report no.:ZEW Discussion Papers 06-14
Abstract:This paper analyzes the importance of equity finance for the R&D activity of small and medium-sized enterprises. We use information on almost 6000 German SMEs from a company survey. Using the intensity of banking competition at the district level as instrument to control for endogeneity, we find that a higher equity ratio is conducive to more R&D for young but not for old companies. Equity may be a constraining factor 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 relay less on outside financing. The positive influence is found for R&D intensity but not for the decision whether to perform R&D. Equity financing is therefore especially important for the most innovative, young companies.
Subjects:activity
equity finance
small and medium-sized enterprises
JEL:G32
O32
more recent Version:http://hdl.handle.net/10419/28604
Document Type:Working Paper
Appears in Collections:Publikationen von Forscherinnen und Forschern des ZEW
ZEW Discussion Papers

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