ABSTRACT

Halit Gonenc

University of Groningen, The Netherlands

This chapter examines the financing patterns of R&D expenditures using data from 38 countries for the period 1980-2006. The major hypothesis is that higher equity financing and higher past stock market valuation are associated with higher R&D expenditures. The evidence supports this hypothesis for firms, especially in market-based countries. The sensitivities of equity financing and internal funds are differ­ent between financially constrained and unconstrained firms. The results are robust when the effect of patent rights protection, which has also a nonlinear effect on R&D, is controlled.