The Financing of Innovative Firms

By Bronwyn H Hall. 2010

229 citations recorded by the source corpus.

To what extent are new and/or innovative firms fundamentally different from established firms, and therefore require a different form of financing? The theoretical background for this proposition is presented, and the empirical evidence on its importance is reviewed. Owing to the intangible nature of their investment, asymmetric-information and moral-hazard, these firms are more likely to be financed by equity than debt and behave in some cases as though they are cash-constrained, especially if they are small. Recognizing the role for public policy in this area, many countries have implemented specific policies to bring the cost of financing innovation more in line with the level that would prevail in the absence of market failures.

Subfields: Accounting, Economics and Econometrics

View Paper: https://www.semanticscholar.org/paper/e0e03fcf764e1260bef72a316e14c72576751761

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Citations in the corpus

Determinants of Cross-Border Venture Capital Investments in Emerging and Developed Economies: The Effects of Relational and Institutional Trust (2015, unknown): “In particular, they fail to acknowledge the inherent features of innovation, which makes its finance distinctively challenging (Hall 2010; Hall and Lerner 2009).”
The demand and supply of external finance for innovative firms (2013, unknown): “…about their success or failure is only gradually revealed over time; they create idiosyncratic intangible capital with limited marketability; they typically need to be smoothed over time in order for the firm to retain valuable employees and avoid dispersing its knowledge base (Hall, 2010).”
From Finance to Marketing: The Impact of Financial Leverage on Customer Satisfaction (2015, background): “A stream of finance literature has argued that the firms with more intangible assets (such as marketing and R&D assets) will tend to use less debt because intangible assets have low collateral values, which make debt financing more expensive (Garmaise 2009; Hall 2010; Titman and Wessels 1988).”
Financing patterns of European SMEs – an empirical taxonomy (2016, unknown): “Equity investors, however, participate in the success of the firm and can compensate the higher risks with a potential higher return in the case of success (Carpenter and Petersen 2002a; Hall 2010).”
Financing constraints, R&D investments and innovative performances: new empirical evidence at the firm level for Europe (2016, background): “…and moral hazard affecting the financing of capital investments in general are exacerbated in the case of R&D financing, with respect to which contract incompleteness, opaqueness and information asymmetry between firms and investors are also more pervasisve (Hall 2010; Hall and Lerner 2010).”
How SMEs exploit their intellectual property assets: evidence from survey data (2011, unknown): “…use the techniques of the sale and license-back of IP rights or IP securitization.3 A fourth alternative to generate extra revenues for patents consists of selling them, particularly if they 1 Excellent reviews on the financing of innovation are provided by Hall (2002, 2009) and Harhoff (2009).”