TY  - JOUR
AU  - Hall,Bronwyn H.
TI  - Investment and Research and Development at the Firm Level:  Does the Source of Financing Matter?
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 4096
PY  - 1992
Y2  - June 1992
UR  - http://www.nber.org/papers/w4096
L1  - http://www.nber.org/papers/w4096.pdf
N1  - Author contact info:
Bronwyn H. Hall
Dept. of Economics
549 Evans Hall
UC Berkeley
Berkeley, CA 94720-3880
Tel: 510/642-3878
Fax: 510/548-5561
E-Mail: bhhall@nber.org
AB  - The elasticity of investment and R&D investment with respect to cash flow is unambiguously positive in a large panel of U.S. manufacturing firms from 1973 to 1987. even with proper controls for permanent differences across firms and for simultaneity. I argue that the evidence favors liquidity constraints rather than just demand effects as the cause of this finding. Other results are that debt is not favored as a form of finance for R&D-intensive firms; leverage ratios and R&D investment are strongly negatively correlated across firms and this is not accounted for by differences in corporate taxation. Finally, the contemporaneous relationship between changes in debt levels and investment which I have previously documented (Hall 1990b and Hall 1991) is one of simultaneity, and apparently transitory, unlike the relationship between cash flow and investment.
ER  -