Firm R&D and Financial Analysis: How Do They Interact?

No 12433, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: Entrepreneurs undertake more R&D when financiers are better informed about their projects because they expect to receive more funding for successful projects. Conversely, financiers learn more about projects when entrepreneurs perform more R&D because then the opportunity cost of mis-investing is higher. Thus R&D and financial analysis are mutually reinforcing. Evidence based on two quasi-natural experiments supports this interaction. Quantitatively, investors' learning accounts for over a quarter of the total effect of a policy designed to stimulate R&D. A calibration suggests that the interaction's contribution to income growth represents a third of the total contributions of learning and R&D.

Keywords: Financial development; Growth; Technological progress; Innovation; Capital allocation; Learning (search for similar items in EconPapers)
JEL-codes: G20 O31 O4 (search for similar items in EconPapers)
Date: 2017-11
New Economics Papers: this item is included in nep-ent, nep-fdg, nep-ino, nep-ppm and nep-sbm
References: Add references at CitEc
Citations:

Downloads: (external link)
https://cepr.org/publications/DP12433 (application/pdf)
CEPR Discussion Papers are free to download for our researchers, subscribers and members. If you fall into one of these categories but have trouble downloading our papers, please contact us at subscribers@cepr.org

Related works:
Journal Article: Firm R&D and financial analysis: How do they interact? (2023)
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:cpr:ceprdp:12433

Ordering information: This working paper can be ordered from
https://cepr.org/publications/DP12433

Access Statistics for this paper

More papers in CEPR Discussion Papers from C.E.P.R. Discussion Papers Centre for Economic Policy Research, 33 Great Sutton Street, London EC1V 0DX.
Bibliographic data for series maintained by ().