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

60 Pages Posted: 25 Jul 2016

See all articles by Jim Goldman

Jim Goldman

University of Toronto

Joel Peress

INSEAD - Finance

Multiple version iconThere are 2 versions of this paper

Date Written: July 25, 2016


Entrepreneurs undertake more R&D when financiers are better informed about their projects because they expect to receive more funding should those projects prove successful.

Financiers learn more about projects when entrepreneurs perform more R&D because then the opportunity cost of misinvesting is higher. Results from two quasi-natural experiments are consistent with this interaction between R&D and learning.

Investors’ learning accounts for a third of the total effect of a policy that stimulates R&D; and a calibration suggests that the R&D-learning interaction’s contribution to income growth represents a third of the total contributions of R&D and learning.

Keywords: Financial Development, Growth, Technological Progress, Innovation, Capital Allocation, Learning

JEL Classification: G20, O31, O4

Suggested Citation

Goldman, Jim and Peress, Joel, Firm R&D and Financial Analysis: How Do They Interact? (July 25, 2016). INSEAD Working Paper No. 2016/53/FIN. Available at SSRN: or

Jim Goldman

University of Toronto ( email )

Department of Economics
Toronto, Ontario M5S 3G7

Joel Peress (Contact Author)

INSEAD - Finance ( email )

Boulevard de Constance
F-77305 Fontainebleau Cedex
+33 1 60 72 40 00 (Phone)
+33 1 60 72 40 45 (Fax)

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