Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation

Título traducido de la contribución: Jóvenes Empresas Innovadoras, Flujo de Inversiones-Cash Flow Sensibilidades y Desasignaciones Tecnológicas

Andres Felipe Garcia Suaza, Oscar Mauricio Valencia-Arana, Jose Eduardo Gomez-Gonzalez

Resultado de la investigación: Documento de Trabajo

Resumen

Can a bad technological allocation generate financial friction? We built a theory model with verifiable implications, in which the poor distribution between R&D and production The activity of the banks generates debt limitations. The investor offers the innovator a rent that is contingent on the success of your project in order to make you exercise a level of effort compatible with the incentives. However, this rent distorts the allocation of effort between activities. Specifically, it leads to a sub-optimal level of effort by driving a reallocation of resources from production to R&D. Consequently, the investor may not to appropriate the surplus resulting from the innovation. This distortion increases the cost of external financing for companies that have a large volume of intangible assets. Using Compustat manufacturing company data in the United States between 1982 and 2007, we have show that cash flow sensitivity is positive and increasing in companies with a high level of R&D intensities.
Idioma originalEnglish (US)
Número de páginas21
ISBN (versión digital)978-92-79-07785-2
EstadoPublished - jun 2017

Huella dactilar

Investors
Rent
Misallocation
Investment-cash flow sensitivity
Firm investment
Innovators
Incentive compatible
Intangible assets
Cash flow
Reallocation
Costs
Borrowing constraints
Citations
Financial frictions
Innovation
External financing
Resources
Manufacturing firms
Surplus
Make-to-order

Citar esto

Garcia Suaza, A. F., Valencia-Arana, O. M., & Gomez-Gonzalez, J. E. (2017). Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation.
Garcia Suaza, Andres Felipe ; Valencia-Arana, Oscar Mauricio ; Gomez-Gonzalez, Jose Eduardo . / Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation. 2017.
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Garcia Suaza, AF, Valencia-Arana, OM & Gomez-Gonzalez, JE 2017 'Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation'.

Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation. / Garcia Suaza, Andres Felipe; Valencia-Arana, Oscar Mauricio ; Gomez-Gonzalez, Jose Eduardo .

2017.

Resultado de la investigación: Documento de Trabajo

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PY - 2017/6

Y1 - 2017/6

N2 - Can technological misallocation generate financial frictions? We build a theoretical model with testable implications, in which the misallocation between R&D and production activities generates borrowing constraints. The investor offers the innovator a rent that is contingent to the success of its project in order to make them exert an incentive-compatible effort level. However, this rent distorts the allocation of effort between activities. Specifically, it leads to a suboptimal level of effort impulsing a reallocation of resources from production to R&D. Consequently, the investor cannot appropriate the surplus resulting from innovation. This distortion increases the cost of external financing for firms that have large amount of intangible assets. Using Compustat data for manufacturing firms in the United States between 1982 and 2007, we show that cash-flow sensitivities are positive and increasing in firms with high R&D intensities Suggested Citation

AB - Can technological misallocation generate financial frictions? We build a theoretical model with testable implications, in which the misallocation between R&D and production activities generates borrowing constraints. The investor offers the innovator a rent that is contingent to the success of its project in order to make them exert an incentive-compatible effort level. However, this rent distorts the allocation of effort between activities. Specifically, it leads to a suboptimal level of effort impulsing a reallocation of resources from production to R&D. Consequently, the investor cannot appropriate the surplus resulting from innovation. This distortion increases the cost of external financing for firms that have large amount of intangible assets. Using Compustat data for manufacturing firms in the United States between 1982 and 2007, we show that cash-flow sensitivities are positive and increasing in firms with high R&D intensities Suggested Citation

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Garcia Suaza AF, Valencia-Arana OM, Gomez-Gonzalez JE. Young Innovative Firms, Investment-Cash Flow Sensitivities and Technological Misallocation. 2017 jun.