Scandinavian Working Papers in Economics

Working Paper Series in Economics and Institutions of Innovation,
Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies

No 192: Equity Financing and Innovation: is Europe different from the United States?

Gustav Martinsson ()
Additional contact information
Gustav Martinsson: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, Postal: CESIS - Centre of Excellence for Science and Innovation Studies, Royal Institute of Technology, SE-100 44 Stockholm, Sweden

Abstract: During the mid and late 1990s young, high-tech firms in the U.S. experienced a supply shift in both internal and external equity fueling a finance driven boom in corporate R&D. I estimate dynamic R&D regression models for high-tech firms, separately for the U.K. and Continental Europe, and find significant cash flow effects for newly listed firms in both samples, but only the new, high-tech firms in the U.K. experienced a supply shift in external equity as well. The findings of this paper suggest a channel through which market based financial systems outperform the bank based economies of Continental Europe.

Keywords: Financing constraints; R&D; Stock Issues; Econometrics; Financial markets; international economics

JEL-codes: G32; O32

29 pages, August 26, 2009

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