NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Zhaoxia Xu

Dept of Finance and Risk Engineering
New York University
6 MetroTech Center, New York, NY 11201.

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NBER Working Papers and Publications

December 2013Financial Dependence and Innovation: The Case of Public versus Private Firms
with Viral V. Acharya: w19708
This paper examines the relationship between innovation and firms' dependence on external capital by analyzing the innovation activities of privately-held and publicly-traded firms. We find that public firms in external finance dependent industries generate patents of higher quantity, quality, and novelty compared to their private counterparts, while public firms in internal finance dependent industries do not have a significantly better innovation profile than matched private firms. The results are robust to various empirical strategies that address selection bias. The findings suggest that public listing is beneficial to the innovation of firms in industries with a greater need for external capital.
 
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