Technology Spillovers, Asset Redeployability, and Corporate Financial Policies
Reprinted in Harnessing Digitalization for Sustainable Economic Development: Insights for Asia, John Beirne and David G. Fernandez, eds., Asian Development Bank Institute, 2022
54 Pages Posted: 8 Jan 2018 Last revised: 4 Apr 2022
Date Written: July 28, 2016
Prior research shows that technology spillovers across firms increase innovation, productivity, and value. We study how firms finance their own growth stimulated by technology spillovers from their technological peer firms. We find that greater technology spillovers lead to higher leverage. This is the result of technology spillovers increasing asset redeployability, as evidenced by more collateralized borrowing and asset transactions. Borrowing costs also decrease. Exogenous variation in the R&D tax credits of other firms allows us to identify the causal effect of technology spillovers on a given firm.
Keywords: Innovation; Technology spillovers; Capital structure; Asset redeployability; Cost of debt
JEL Classification: G12, G31, G32, G33, G34, O31, O33
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