Financing Innovation

24 Pages Posted: 6 Nov 2014

See all articles by William Kerr

William Kerr

Harvard University - Entrepreneurial Management Unit

Ramana Nanda

Harvard University - Entrepreneurial Management Unit; National Bureau of Economic Research (NBER)

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Date Written: November 5, 2014

Abstract

We review the recent literature on the financing of innovation, inclusive of large companies and new startups. This research strand has been very active over the past five years, generating important new findings, questioning some long-held beliefs, and creating its own puzzles. Our review outlines the growing body of work that documents a role for debt financing related to innovation. We highlight the new literature on learning and experimentation across multi-stage innovation projects and how this impacts optimal financing design. We further highlight the strong interaction between financing choices for innovation and changing external conditions, especially reduced experimentation costs.

Keywords: finance, innovation, entrepreneurship, banks, venture capital, experimentation.

JEL Classification: G21, G24, L26, M13, O31, 032

Suggested Citation

Kerr, William R. and Nanda, Ramana, Financing Innovation (November 5, 2014). Harvard Business School Entrepreneurial Management Working Paper No. 15-034, Available at SSRN: https://ssrn.com/abstract=2519572 or http://dx.doi.org/10.2139/ssrn.2519572

William R. Kerr (Contact Author)

Harvard University - Entrepreneurial Management Unit ( email )

Soldiers Field Road
Morgan 270C
Boston, MA 02163
United States

Ramana Nanda

Harvard University - Entrepreneurial Management Unit ( email )

Boston, MA 02163
United States

HOME PAGE: http://www.people.hbs.edu/rnanda

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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