The Implications of Debt Heterogeneity for R&D Investment and Firm Performance

By Parthiban David, J. O’Brien, Toru Yoshikawa. 2008

199 citations recorded by the source corpus.

An assumption in prior research is that debt is homogeneous and provides inappropriate governance for R&D investments. We argue that debt is heterogeneous: although transactional debt does indeed impose strict contractual constraints that provide inappropriate governance for R&D investments, relational debt has very different characteristics that provide more appropriate governance. Using a sample of Japanese firms, we find that firms that align their debt structures with their R&D investments perform better than those that are misaligned. Furthermore, firms tend to align their debt structure with R&D investments, but only after deregulation permits relatively free access to various types of debt.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/29e812260eeba01559ce672a288b841b1dd70550

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Citations in the corpus

Industrial research versus development investment: The implications of financial constraints (2011, background): “Recently, this finding has been complemented by Czarnitzki et al. (2009) who show that”
Family Ownership, Board Independence, and R&D Investment (2009, methodology): “Leverage was defined as total debt divided by total assets (Barker & Mueller, 2002) and as total debt divided by firm market value (David et al., 2008).”
Organizing Around Transaction Costs: What Have We Learned and Where Do We Go from Here? (2013, background): “Each firm has a unique history that creates cultural and institutional (Brouthers, 2002), financial (David et al., 2008), and/or strategic constraints (Simerly & Li, 2000) on managers’ ability to act as TCE predicts.”
Public Governance, Corporate Governance, and Firm Innovation: An Examination of State-Owned Enterprises (2019, unknown): “Moreover, our distinction between the quantity and novelty of innovation expand the predominant focus on agents’ underinvestment in innovation across the board (e.g., Baysinger et al., 1991; Kochhar & David, 1996; Lee & O’Neill, 2003; David et al., 2008).”