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Divergent effects of external financing on technology innovation activity: Korean evidence

Author

Listed:
  • Kim, Seokchin
  • Lee, Hyunchul
  • Kim, Joongi

Abstract

This paper explores a variety of effects of external financing subdivided into bank loans and bond and stock issues on the technology innovation activity (TIA) of Korean listed firms for the full sample period of 1st January 2000 to 31st December 2008. We find evidence that indirect external financing of bank loans makes a negative impact on TIA of the Korean firms whereas direct external financing of security issues does a positive one on it. The results support the hypothesis of manager discretion that banks' conservative lending criteria demanding considerable collaterals from firms discourage managers from an investment in TIA with high risk-high return while external financing via security issues grants managers more discretion for their TIA. This study building up the prior literature that primarily devote to an effect of internal financing on TIA of firms provides firm managers or academic researchers with valuable implications for evaluation of various impacts and roles of external financing in association with financing decisions for TIA of firms.

Suggested Citation

  • Kim, Seokchin & Lee, Hyunchul & Kim, Joongi, 2016. "Divergent effects of external financing on technology innovation activity: Korean evidence," Technological Forecasting and Social Change, Elsevier, vol. 106(C), pages 22-30.
    • Handle: RePEc:eee:tefoso:v:106:y:2016:i:c:p:22-30
    DOI: 10.1016/j.techfore.2016.02.002
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    Cited by:

    1. Baifang Wang, 2024. "Does Structural Matching between Finance and Law Promote Economic Development?," China & World Economy, Institute of World Economics and Politics, Chinese Academy of Social Sciences, vol. 32(5), pages 140-165, September.
    2. Wang, Xiaozhen & Liu, Shan & Tao, Ziyang & Cao, Qun, 2022. "The impact of industrial policy and its combinations on the innovation quality of wind power enterprises: A study from the perspective of financing modes," Renewable Energy, Elsevier, vol. 188(C), pages 945-956.
    3. Alfonso Aranda-Usón & Pilar Portillo-Tarragona & Luz María Marín-Vinuesa & Sabina Scarpellini, 2019. "Financial Resources for the Circular Economy: A Perspective from Businesses," Sustainability, MDPI, vol. 11(3), pages 1-23, February.
    4. Muhammad Kaleem Khan & Ahmad Kaleem & Salman Zulfiqar & Umair Akram, 2019. "Innovation Investment: Behaviour Of Chinese Firms Towards Financing Sources," International Journal of Innovation Management (ijim), World Scientific Publishing Co. Pte. Ltd., vol. 23(07), pages 1-29, October.
    5. Tuan Doanh Le & Duong Phuong Thao Pham & Tuan Bach Le, 2019. "The Relationship Between Financial Development and Innovation: Empirical Evidence from Selected Asian Countries," Acta Universitatis Agriculturae et Silviculturae Mendelianae Brunensis, Mendel University Press, vol. 67(1), pages 287-298.
    6. Maldonado-Guzmán, Gonzalo & Pinzón-Castro, Sandra Yesenia, 2022. "Financial resources, eco-innovation and sustainability performance in automotive industry," TEC Empresarial, School of Business, Costa Rica Institute of Technology (ITCR), vol. 16(2), pages 34-54.
    7. Ding Hu & Xianming Fang & Yuting Meng DiGiovanni, 2023. "Technological progress, financial constrains, and digital financial inclusion," Small Business Economics, Springer, vol. 61(4), pages 1693-1721, December.
    8. Hong Xu & Baozhen Liu & Kai Lin & Yunyun Zhang & Bei Liu & Mingjie Xie, 2022. "Towards Carbon Neutrality: Carbon Emission Performance of Science and Technology Finance Policy," IJERPH, MDPI, vol. 19(24), pages 1-22, December.
    9. Lin, Boqiang & Xie, Yongjing, 2024. "How feed-in-tariff subsidies affect renewable energy investments in China? New evidence from firm-level data," Energy, Elsevier, vol. 294(C).
    10. Tat Dat Bui & Mohd Helmi Ali & Feng Ming Tsai & Mohammad Iranmanesh & Ming-Lang Tseng & Ming K Lim, 2020. "Challenges and Trends in Sustainable Corporate Finance: A Bibliometric Systematic Review," JRFM, MDPI, vol. 13(11), pages 1-26, October.
    11. Gaukhar Kalkabayeva & Aibota Rakhmetova & Gulmira Nakipova & Roza Bespayevа & Ziyada Borbasova & Yuliya Saifullina, 2020. "Financial sector assets, real innovation and economic growth: assessment of interconnection and influence of regulatory instruments," Entrepreneurship and Sustainability Issues, VsI Entrepreneurship and Sustainability Center, vol. 8(2), pages 559-577, December.
    12. Peisen LIU & Yufeng XIA, 2021. "Bank Competition and Firm Innovation Output: The Role of Financing Constraints," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-188, December.
    13. Nataliia Spasiv & Olga Kneysler & Iryna Hyzela, 2023. "Current Trends in Financing Innovative Development of Industrial Enterprises in Ukraine," Oblik i finansi, Institute of Accounting and Finance, issue 3, pages 126-137, September.
    14. Wu, Lichao & Wei, Yingqi & Wang, Chengang & McDonald, Frank & Han, Xia, 2022. "The importance of institutional and financial resources for export performance associated with technological innovation," Technological Forecasting and Social Change, Elsevier, vol. 185(C).

    More about this item

    Keywords

    Technology innovation activity; External financing; Bank loans; Security issues; Manager discretion;
    All these keywords.

    JEL classification:

    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • M40 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - General
    • M41 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Accounting - - - Accounting

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