American Economic Journal:
Microeconomics
ISSN 1945-7669 (Print) | ISSN 1945-7685 (Online)
Innovation, Trade, and Finance
American Economic Journal: Microeconomics
vol. 7,
no. 2, May 2015
(pp. 121–57)
Abstract
Heterogeneous firms invest in R&D and expansion investment. Venture capital specializes in R&D financing where problems are largest. Marginal firms get funded by venture capital, while firms with larger debt capacity obtain cheaper bank financing. In the latestage, cash-rich firms invest at an optimal scale, while cash-poor firms are restricted. A country's financial and institutional development determines entry and expansion of firms and their comparative advantage in producing innovative goods. We illustrate how tariffs, R&D subsidies, institutional reform and venture capital improve access to capital, expand innovative industries, boost national welfare and may result in ambiguous international welfare spillovers. (JEL D21, F11, F13, G24, G32, O32)Citation
Egger, Peter, and Christian Keuschnigg. 2015. "Innovation, Trade, and Finance." American Economic Journal: Microeconomics, 7 (2): 121–57. DOI: 10.1257/mic.20120032Additional Materials
JEL Classification
- D21 Firm Behavior: Theory
- F11 Neoclassical Models of Trade
- F13 Trade Policy; International Trade Organizations
- G24 Investment Banking; Venture Capital; Brokerage; Ratings and Ratings Agencies
- G32 Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
- O32 Management of Technological Innovation and R&D
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