Financial Dependence and Innovation: The Case of Public Versus Private Firms

74 Pages Posted: 2 Jun 2014 Last revised: 4 Jun 2014

See all articles by Viral V. Acharya

Viral V. Acharya

New York University (NYU) - Leonard N. Stern School of Business; New York University (NYU) - Department of Finance; Centre for Economic Policy Research (CEPR); European Corporate Governance Institute (ECGI); National Bureau of Economic Research (NBER)

Zhaoxia Xu

UNSW Australia Business School, School of Banking and Finance

Multiple version iconThere are 3 versions of this paper

Date Written: February 1, 2014

Abstract

This paper examines the relationship between innovation and firms' dependence on external capital by analyzing the innovation activities of privately-held and publicly-traded firms We find that public firms in external finance dependent industries generate patents of higher quantity, quality, and novelty compared to their private counterparts, while public firms in internal finance dependent industries do not have a significantly better innovation profile than matched private firms. The results are robust to various empirical strategies that address selection bias. The findings suggest that public listing is beneficial to the innovation of firms in industries with a greater need for external capital.

Keywords: finance and growth, financial constraints, innovation, private firms, public firms, R&D

JEL Classification: G31, G32, O16, O30

Suggested Citation

Acharya, Viral V. and Acharya, Viral V. and Xu, Zhaoxia, Financial Dependence and Innovation: The Case of Public Versus Private Firms (February 1, 2014). CEPR Discussion Paper No. DP9829, Available at SSRN: https://ssrn.com/abstract=2444830

Viral V. Acharya (Contact Author)

New York University (NYU) - Leonard N. Stern School of Business ( email )

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HOME PAGE: http://www.stern.nyu.edu/~vacharya

New York University (NYU) - Department of Finance ( email )

Stern School of Business
44 West 4th Street
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United States

Centre for Economic Policy Research (CEPR) ( email )

London
United Kingdom

European Corporate Governance Institute (ECGI) ( email )

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Belgium

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
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Zhaoxia Xu

UNSW Australia Business School, School of Banking and Finance ( email )

Sydney, NSW 2052
Australia

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