Financing Innovation in New Small Firms: New Evidence from Canada

Statistics Canada Analytical Studies Series 11F0019MIE, Working Paper No. 190

49 Pages Posted: 20 Jul 2002

See all articles by John R. Baldwin

John R. Baldwin

Statistics Canada - Microeconomic Analysis Division

Guy Gellatly

Statistics Canada

Valerie Gaudreault

Government of Canada - Analytical Studies Branch

Date Written: May 2002

Abstract

This paper investigates the financial characteristics of new small firms. The analysis develops a representative, small-firm financial profile, and evaluates the extent to which the proportionate use of different instruments and sources is correlated with industry-level and firm-specific characteristics. Multivariate methods are then used to examine relationships between financial structure, R&D-intensity and innovation.

Our results suggest that relationships between knowledge-intensity and capital structure are bi-directional. After controlling for a range of industry- and firm-level covariates, firms that devote a higher percentage of their investment expenditure to R&D also exhibit less debt-intensive structures. Conversely, debt-intensive structures also act to constrain investments in R&D. These relationships, however, depend upon the type of debt in the asset mix. It is the share of long-term debt to total assets that is negatively related to investments in knowledge.

Keywords: small-firm financing, innovation, research and development

Suggested Citation

Baldwin, John R. and Gellatly, Guy and Gaudreault, Valerie, Financing Innovation in New Small Firms: New Evidence from Canada (May 2002). Statistics Canada Analytical Studies Series 11F0019MIE, Working Paper No. 190. Available at SSRN: https://ssrn.com/abstract=316849 or http://dx.doi.org/10.2139/ssrn.316849

John R. Baldwin (Contact Author)

Statistics Canada - Microeconomic Analysis Division ( email )

24 Floor - R.H.Coats Building
Tunney's Pasture
Ottawa, Ontaria K1A 0T6
Canada
613-951-8588 (Phone)
613-951-5403 (Fax)

Guy Gellatly

Statistics Canada ( email )

Micro-Economic Analysis Division 24-B R.H. Coats Building
Ottawa, Ontario K1A 0T6
Canada
613-951-3758 (Phone)
613-951-5403 (Fax)

Valerie Gaudreault

Government of Canada - Analytical Studies Branch ( email )

120 Parkdale Avenue
24th Floor, R.H. Coats Building
Ottawa, Ontario K1A 0T6
Canada

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