Financial Contracting, R&D and Growth

Szalay, Dezsö

Document Type: Working paper
Year of publication: 1999
The title of a journal, publication series: GK Working Paper Series
Volume: 99-03
Place of publication: Mannheim
Publication language: German
Institution: School of Law and Economics > Graduiertenkolleg VWL/BWL
Subject: 330 Economics
Abstract: This paper investigates the role of financial constraints in R&D races of the type used in Schumpeterian growth theory. In a world of perfect capital markets these models predict that all innovations come from industry outsiders. In reality, however, we observe a pronounced persistence of some dominant firms. We show that this persistence can be explained by constraints on financial contracting. The paper highlights an indirect channel through which agency costs reduce growth: due to agency costs incumbents face little competition from outsiders. Therefore they can afford to innovate less often and to ''rest longer on their laurels'', thereby retarding growth.

Dieser Eintrag ist Teil der Universitätsbibliographie.

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