Essays on Innovation and Capital Structure PDF Download

Author: Jiahong Zhang
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
This dissertation aims at improving the understanding of the relation between innovation investment, financial constraints and capital structure in the context of emerging economies. Since early 1930s, economists have argued that innovation is essential for firm survival, economic growth and development. An independent strand of the literature demonstrates that innovation by firms is a key driver of economic growth. Meanwhile, people also recognized that innovation investment is difficult to finance in a competitive marketplace due to various factors such as taxes, transaction costs, and especially informational asymmetries with external investors. Therefore, financing of innovation becomes an important managerial and policy challenge. A lot of studies have focused on identifying the financial constraints related to risky R&D and innovation investments. Nevertheless, there is little research highlighting the mechanisms that different external financing sources can affect innovation activities differently. Moreover, the implications of innovation investment for future capital structure decisions have not been fully analyzed. I try to shed light on these issues using micro evidence in the context of emerging markets, where financial markets, political systems and economic systems are different than those in the industrialized economies such as the US. Both of the chapters imply the importance of equity financing on innovation investment in developing countries especially for those young, small and private firms. The finding points to the significance of the private equity market for financing of innovation in the emerging economy context.

Author: Amit Seru
Publisher:
ISBN: 9780549180685
Category : Corporations
Languages : en
Pages : 138

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A firm's value consists of the value of its assets in place and the value of its growth options. In my dissertation I focus on understanding how a firm's internal organization and its capital structure interact with its growth options - and hence its value. I hypothesize that firms that want to generate value through innovation would prefer an organizational design and a capital structure that allow for more discretion to managers on long term projects. In accordance with this I show that the conglomerate organizational form has a negative impact on the novelty of corporate R&D activity. The drop in R&D productivity is costly for the firm since it results in a lower market value. Moreover, I present evidence that lack of commitment, weak incentives and asymmetric information are responsible for the impact diversified organizational form has on R&D productivity. I also show that arms length financing (such as public debt and equity) is preferred by more innovative firms, whereas less innovative firms tend to use relationship-based borrowing (such as bank borrowing).

Author: Jon R. Shelton
Publisher:
ISBN:
Category : Corporations
Languages : en
Pages : 158

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Book Description
The first essay develops a typology that identifies the multiple pathways, functions and operations where innovation can occur in a firm's internal business cycle based upon the extant literature that includes both technological and non-technological activities. This is an important step toward developing a comprehensive strategy for a regional economy and provides a common platform for the discussion of innovation among academics and practitioners.The typology adds to the existing knowledge of how innovation works in organizations by describing the pathways, business functions and operations in a firm's internal-business-process; the business strategies used to advance innovation to the market; and the market impact that innovation has in a regional economy.The typology is enhanced by the different threads of literature - innovation, technology, organization and marketing. The integrated approach allows academics and practitioners to understand how and where innovation occurs in firms and lays the foundation for robust metrics of the behavioral relationship between variables under study. The result is a set of assessment tools that permits diagnostics of the firm, industry, market and region. The second essay examines the relationship between innovation, emerging technologies, business firms' investment structure, and specialized types of private equity used to finance emerging technologies. A conceptual framework is developed for financial investment and a set of hypotheses tested for investment between Ohio and U.S. firms. Ohio firms take a different investing approach than U.S. firms when investing in a firm's stage of business development but are not significantly different when using specialized types of financing, investing in industry/technology niches, and investing in geographic markets.The third essay explores the role of innovation in business firms. The essay examines the reasons firms invest in innovation and then test the difference in the innovation behavior of firms. Descriptive analysis is performed in differences in the way firms engage in innovation, their preferred means of pursuing product innovation, and the reasons for engaging in product innovation. Hypotheses tests on the influence of innovation on firms' financial performance follows, as do the tests on differences in firms' contribution to the regional economy. The t-tests of the difference in means in six dimensions of economic impact performance confirm that innovative small to mid-sized firms have greater impacts on their regional economies than do their non-innovative peers.

Author: William Lazonick
Publisher: Oxford University Press
ISBN: 0199695687
Category : Business & Economics
Languages : en
Pages : 391

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Book Description
This book assesses the work, ideas, and influence of the doyen of business historians, Alfred Chandler, particularly on management innovation, strategy, organization, and finance.

Author: Boris Maurer
Publisher: Physica
ISBN:
Category : Business & Economics
Languages : en
Pages : 176

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Book Description
The common topic of this collection of studies is the interaction between innovative activity and industrial structure. This interaction is represented in a modelization via dynamic games. An integrated framework to model innovation and market competition with sequential innovative entry is developed. The framework can be used to analyze both product and process innovations. Furthermore, an analysis of the incentives firms have to strategically defer information relevation about successful innovation (and therefore delayed commercial use) is undertaken. A last topic discussed is the influence of financial constraints on innovational efforts of both constrained and unconstrained firms under competition. Beside these topics a systematic and thorough survey of the newest game theoretical literature is provided.

Author: Tatiana Igorevna Salikhova
Publisher:
ISBN:
Category : Business networks
Languages : en
Pages : 296

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Book Description
In my dissertation I explore how personal networks affect firms' financial decisions. In the first essay, I study how social connections among divisional managers affect the capital allocation to divisions in diversified conglomerates. In contrast to the previous studies, I focus on the horizontal connections or connections formed among managers of the same level of corporate hierarchy. I show that connections among divisional managers lead to higher sensitivity of segment capital spending to segment's growth opportunities, higher firm-level allocation efficiency and higher firm value. Additionally, firms tend to strategically assign better-connected managers to these segments, and connections help to reduce internal information asymmetry. The results are consistent with the idea that connections facilitate interdivisional cooperation and better alignment of divisional and firm's incentives. In the second essay, I examine capital structure decisions of suppliers with social connections to major customers, which invest in relation-specific assets. Suppliers connected to major customers with relation-specific assets have higher debt ratios. The effect is more pronounced when intensity and duration of business relationship is high, and when information asymmetry between parties is high. In addition, building up debt helps suppliers to reduce underleverage and move faster toward target leverage ratios. Overall, the results are consistent with the view that connections help to strengthen implicit contracts through establishing trust between trading parties. In the third essay, I study the effect of divisional manager-CEO social connections on the scale and success of corporate innovation activities. Divisional managers who previously worked or studied with CEO file a greater number of patents during their tenure at the segment. These patents receive more citations in future and represent a greater scientific and economic value. These findings can imply that socials connections help to mitigate adverse selection problems associated with R&D investments.

Author: Rejo Joby Peter
Publisher:
ISBN:
Category :
Languages : en
Pages : 0

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Book Description
This dissertation consists of three empirical studies in finance and innovation. I study various financial factors affecting innovation such as stock market manipulation and public to private transaction. I also investigate the effect of ownership structure on these public to private transactions. The first study finds that the End-of-day price manipulation is associated with short-termism of the firms orientation, long-term harm to a firms equity values, and commensurate with reduced incentives for employees to innovate. Insider trading, by contrast, enables innovators to achieve exacerbated profits from innovation. Using a sample of suspected manipulation events for all stocks from nine countries over the years 2003-2010, I find evidence consistent with these real impacts of market manipulation on innovation. These findings are not attributable to bad firms innovating less and manipulating more, since the average firm subjected to manipulation in the sample is more innovative during the pre-manipulation period. The second study investigates the effect of going private buyout transactions on the investments in innovation using an international sample of buyout transactions from 36 countries over 1997 to 2011. Patent counts and citations are used to proxy for quantity, quality and economic importance of innovation. The data indicate that the effect of buyouts on innovation is quite sizable in terms of quantity and quality, as both patent counts and citations drop following a buyout. I also find that the number of radical patents (i.e. more scientific) drop as well. When we split the sample into institutional and management buyouts the negative association is only confirmed for institutional buyouts. We find that the negative effect of buyouts on innovation is aggravated in post-2006 period, suggesting that the nature of deals has worsened for innovation over time. The data also show that buyouts have a negative effect on innovation efficiency. The third study considers ownership structure of target firms that are subject to going private buyout transactions, which are often highly leveraged and give rise to potential agency conflicts among existing shareholders. In this study, I examine ownership structure prior to going private transactions in 33 countries around the world from 2002 to 2014.The data indicate strong and consistent evidence that pre-going private ownership is characterized by higher institutional and corporate ownership. Family ownership lowers the probability of a public to private transaction. Stronger creditor rights increase the probability of going private particularly for whole company and institutional buyouts.

Author: Han Liu
Publisher:
ISBN:
Category :
Languages : en
Pages : 103

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The current thesis presents three chapters in finance that investigate how a firm's characteristics affect its internal corporate financing decision as well as the external perception of the firm by the financial market. The paper advances empirical asset pricing by studying how the market's expectations about firms vary systematically with firms' profitabilities and the impact of these expectations on stock prices. Further, the paper adds to corporate finance by investigating new channels through which firms determine their capital structure and compensation contract for their executives. Previous research indicated that sorting firms by their profitabilities generates sizeable cross-sectional variations in subsequent period stock returns. Firms that have high profitability this period tend to outperform low profitability firms in the next period. The first chapter of this paper investigates whether high profit firms have higher returns because they are fundamentally riskier in some way, or whether mispricing drives the return difference. The chapter presents evidence that the premium associated with profitability is difficult to reconcile with risk-based explanations but is consistent with expectation errors. Firms with a lower profitability prove more volatile, suffer greater drawdowns and are more sensitive to macroeconomic conditions. This means that the profitable firms are actually less risky by most measures and perform better during economic downturns. In addition, a monotonic relationship exists between profitability and forecast error. Stock analysts tend to be overoptimistic for low profitability firms relative to high profitability firms. Surprisingly, this mis-expectation can persist for as long as five years into the future. Furthermore, the profitability premium is mainly concentrated among firms about which the anlysts express the most optimism. The second chapter, jointly authored with Francesco D'Acunto, Carolin Pflueger and Michael Weber, shows that the frequency with which firms adjust output prices is an important determinant of persistent capital structure. Using restricted BLS data, we constructed a measure of the individual firm's output price rigidity and matched it with financial information of the firm. Flexible-price firms choose higher financial leverage than inflexible-price firms, controlling for known determinants of capital structure. We rationalize this novel fact using a costly-state-verification model, where inflexible-price firms are more exposed to aggregate shocks, and hence face tighter financial constraints. The model predicts that bank lending, by providing monitoring, relaxes financial constraints and narrows the leverage gap between inflexible- and flexible-price firms. Consistent with model predictions, we show that inflexible-price firms increased leverage more than did flexible-price firms following the staggered implementation of the 1994 repeal of interstate bank branching regulations. Firms' frequency of price adjustment did not change around this deregulation, supporting a causal interpretation of price flexibility on corporate leverage. In the third chapter of the dissertation, I investigate the role that innovation plays in executive compensation. Agency-based theory of optimal executive compensation literature has long puzzled over the empirical observation that executives are being compensated for industry performances that are outside the executive's control. Using patent-based metrics as the measure of innovativeness, I show that this "pay for luck" phenomenon is mainly concentrated among the most innovative firms and is stronger for firms in more innovative industries. I conjecture that motivating innovation might require a different contract design,and in some cases, "pay for luck" might actually be optimal in incentivizing experimentation.

Author: Wolfgang J. M. Drechsler
Publisher: Anthem Press
ISBN: 1843317850
Category : Business & Economics
Languages : en
Pages : 443

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Book Description
'Techno-Economic Paradigms' presents a series of essays discussing one of the most interesting and talked-about socio-economic theories of our times: techno-economic paradigm shifts.

Author: Martin Shubik
Publisher: MIT Press
ISBN: 9780262693110
Category : Business & Economics
Languages : en
Pages : 472

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Book Description
This first volume in a three-volume exposition of Shubik's vision of "mathematical institutional economics" explores a one-period approach to economic exchange with money, debt, and bankruptcy. This is the first volume in a three-volume exposition of Martin Shubik's vision of "mathematical institutional economics"--a term he coined in 1959 to describe the theoretical underpinnings needed for the construction of an economic dynamics. The goal is to develop a process-oriented theory of money and financial institutions that reconciles micro- and macroeconomics, using as a prime tool the theory of games in strategic and extensive form. The approach involves a search for minimal financial institutions that appear as a logical, technological, and institutional necessity, as part of the "rules of the game." Money and financial institutions are assumed to be the basic elements of the network that transmits the sociopolitical imperatives to the economy. Volume 1 deals with a one-period approach to economic exchange with money, debt, and bankruptcy. Volume 2 explores the new economic features that arise when we consider multi-period finite and infinite horizon economies. Volume 3 will consider the specific role of financial institutions and government, and formulate the economic financial control problem linking micro- and macroeconomics.