Financial Dependence and Innovation: The Case of Public versus Private Firms
65 Pages Posted: 2 Dec 2013 Last revised: 20 Nov 2018
Date Written: April 7, 2015
In this paper, we examine the relation between innovation and a firm's financial dependence using a sample of privately-held and publicly-traded U.S. firms. We find that public firms in external finance dependent industries spend more on R&D and generate a better patent portfolio than their private counterparts, while public firms in internal finance dependent industries do not have a better innovation profile than private firms. The results are robust to various empirical strategies that address selection bias. The findings indicate that the influence of public listing on innovation depends on the need for external capital.
Keywords: Private Firms, Public Firms, Innovation, R&D, Finance and Growth, Financial Constraints
JEL Classification: G31, G32, O30, Ol6
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