Young innovative firms, investment-cash flow sensitivities and technological misallocation
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 i...
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| Formato: | Documento de trabajo (Working Paper) |
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Banco de la República de Colombia
2017
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| Acceso en línea: | http://repositorio.banrep.gov.co/handle/20.500.12134/6317 |
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oai:RI-BanRep:20.500.12134-63172019-04-16T16:32:45Z Young innovative firms, investment-cash flow sensitivities and technological misallocation Valencia-Arana, Oscar Mauricio Gómez-González, José Eduardo García-Suaza, Andrés Felipe Riesgo moral Restricciones de crédito y mala asignación tecnológica D86 - Economics of Contract: Theory O33 - Technological Change: Choices and Consequences; Diffusion Processes G11 - Portfolio Choice; Investment Decisions Moral hazard Endogenous borrowing constraints and technological misallocation Crédito -- Flujo de efectivo -- Estados Unidos -- 1982-2007 Inversiones -- Toma de decisiones -- Errores Innovaciones empresariales -- Toma de decisiones -- Errores Riesgo (Economía) G11 - Selección de cartera; Decisiones de inversión D86 - Economía de los contratos: teoría O33 - Cambio tecnológico: opciones y consecuencias; Difusión 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. 2017-06-12 2017-06-12 Working Paper Documentos de trabajo Published Version http://repositorio.banrep.gov.co/handle/20.500.12134/6317 http://hdl.handle.net/20.500.12134/6317 eng Documentos de trabajo Borradores de Economía Borradores de Economía; No. 1004 https://ideas.repec.org/p/bdr/borrec/1004.html Open Access https://creativecommons.org/licenses/by-nc-sa/4.0/ Acceso abierto Atribucion-NoComercial-CompartirIgual CC BY-NC-SA 4.0 Las opiniones contenidas en el presente documento son responsabilidad exclusiva de los autores y no comprometen al Banco de la República ni a su Junta Directiva. 20 páginas : tablas PDF application/pdf Bogotá Banco de la República de Colombia Acharya, V. V., Almeida, H., and Campello, M. (2007). Is cash negative debt? a hedging perspective on corporate financial policies. Journal of Financial Intermediation, 16(4):515–554. Almeida, H. and Campello, M. (2007). Financial constraints, asset tangibility, and corporate investment. Review of Financial Studies, 20(5):1429–1460. Almeida, H., Campello, M., and Weisbach, M. S. (2004). The cash flow sensitivity of cash. The Journal of Finance, 59(4):1777–1804. |
| institution |
Repositorio Institucional del Banco de la República de Colombia |
| collection |
DSpace |
| language |
Inglés (English) |
| topic |
Riesgo moral Restricciones de crédito y mala asignación tecnológica D86 - Economics of Contract: Theory O33 - Technological Change: Choices and Consequences; Diffusion Processes G11 - Portfolio Choice; Investment Decisions Moral hazard Endogenous borrowing constraints and technological misallocation Crédito -- Flujo de efectivo -- Estados Unidos -- 1982-2007 Inversiones -- Toma de decisiones -- Errores Innovaciones empresariales -- Toma de decisiones -- Errores Riesgo (Economía) G11 - Selección de cartera; Decisiones de inversión D86 - Economía de los contratos: teoría O33 - Cambio tecnológico: opciones y consecuencias; Difusión |
| spellingShingle |
Riesgo moral Restricciones de crédito y mala asignación tecnológica D86 - Economics of Contract: Theory O33 - Technological Change: Choices and Consequences; Diffusion Processes G11 - Portfolio Choice; Investment Decisions Moral hazard Endogenous borrowing constraints and technological misallocation Crédito -- Flujo de efectivo -- Estados Unidos -- 1982-2007 Inversiones -- Toma de decisiones -- Errores Innovaciones empresariales -- Toma de decisiones -- Errores Riesgo (Economía) G11 - Selección de cartera; Decisiones de inversión D86 - Economía de los contratos: teoría O33 - Cambio tecnológico: opciones y consecuencias; Difusión Valencia-Arana, Oscar Mauricio Gómez-González, José Eduardo García-Suaza, Andrés Felipe Young innovative firms, investment-cash flow sensitivities and technological misallocation |
| description |
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. |
| format |
Documento de trabajo (Working Paper) |
| author |
Valencia-Arana, Oscar Mauricio Gómez-González, José Eduardo García-Suaza, Andrés Felipe |
| author_facet |
Valencia-Arana, Oscar Mauricio Gómez-González, José Eduardo García-Suaza, Andrés Felipe |
| author_sort |
Valencia-Arana, Oscar Mauricio |
| title |
Young innovative firms, investment-cash flow sensitivities and technological misallocation |
| title_short |
Young innovative firms, investment-cash flow sensitivities and technological misallocation |
| title_full |
Young innovative firms, investment-cash flow sensitivities and technological misallocation |
| title_fullStr |
Young innovative firms, investment-cash flow sensitivities and technological misallocation |
| title_full_unstemmed |
Young innovative firms, investment-cash flow sensitivities and technological misallocation |
| title_sort |
young innovative firms, investment-cash flow sensitivities and technological misallocation |
| publisher |
Banco de la República de Colombia |
| publishDate |
2017 |
| url |
http://repositorio.banrep.gov.co/handle/20.500.12134/6317 |
| _version_ |
1637304916117553152 |
| score |
12,131701 |