The Financing of Research and Development

35 Pages Posted: 7 Feb 2002 Last revised: 23 Dec 2022

See all articles by Bronwyn H. Hall

Bronwyn H. Hall

University of California at Berkeley; National Bureau of Economic Research (NBER); Institute for Fiscal Studies (IFS); Max Planck Institute for Innovation and Competition

Date Written: February 2002

Abstract

Evidence on the 'funding gap' for R&D is surveyed. The focus is on financial market reasons for underinvestment in R&D that persist even in the absence of externality-induced underinvestment. The conclusions are that 1) small and new innovative firms experience high costs of capital that are only partly mitigated by the presence of venture capital; 2) evidence for high costs of R&D capital for large firms is mixed, although these firms do prefer internal funds for financing these investments; 3) there are limits to venture capital as a solution to the funding gap, especially in countries where public equity markets are not highly developed; and 4) further study of governmental seed capital and subsidy programs using quasi-experimental methods is warranted.

Suggested Citation

Hall, Bronwyn H., The Financing of Research and Development (February 2002). NBER Working Paper No. w8773, Available at SSRN: https://ssrn.com/abstract=299817

Bronwyn H. Hall (Contact Author)

University of California at Berkeley ( email )

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Berkeley, CA 94720-3880
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HOME PAGE: http://emlab.berkeley.edu/users/bhhall/index.html

National Bureau of Economic Research (NBER)

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Institute for Fiscal Studies (IFS)

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Max Planck Institute for Innovation and Competition

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Germany

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