IDEAS home Printed from https://ideas.repec.org/p/chf/rpseri/rp1979.html
   My bibliography  Save this paper

Debt, Innovation, and Growth

Author

Listed:
  • Thomas Geelen

    (Copenhagen Business School - Department of Finance; Danish Finance Institute)

  • Jakub Hajda

    (University of Lausanne; Swiss Finance Institute)

  • Erwan Morellec

    (Ecole Polytechnique Fédérale de Lausanne; Swiss Finance Institute)

Abstract

Recent empirical studies show that innovative firms heavily rely on debt financing. This paper investigates the relation between debt financing, innovation, and growth in a Schumpeterian growth model in which firms' dynamic R&D and financing choices are jointly and endogenously determined. The paper demonstrates that while debt hampers innovation by incumbents due to debt overhang, it also stimulates entry, thereby fostering innovation and growth at the aggregate level. The paper also shows that debt financing has large effects on firm entry, firm turnover, and industry structure and evolution. Lastly, it predicts substantial intra-industry variation in leverage and innovation, in line with the empirical evidence..

Suggested Citation

  • Thomas Geelen & Jakub Hajda & Erwan Morellec, 2019. "Debt, Innovation, and Growth," Swiss Finance Institute Research Paper Series 19-79, Swiss Finance Institute.
    • Handle: RePEc:chf:rpseri:rp1979
    as

    Download full text from publisher

    File URL: https://papers.ssrn.com/sol3/papers.cfm?abstract_id=3416576
    Download Restriction: no
    ---><---

    Citations

    Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
    as


    Cited by:

    1. José Manuel Santos‐Jaén & Antonia Madrid‐Guijarro & Domingo García‐Pérez‐de‐Lema, 2021. "The impact of corporate social responsibility on innovation in small and medium‐sized enterprises: The mediating role of debt terms and human capital," Corporate Social Responsibility and Environmental Management, John Wiley & Sons, vol. 28(4), pages 1200-1215, July.
    2. Balter, Anne G. & Huisman, Kuno J.M. & Kort, Peter M., 2022. "Effects of creative destruction on the size and timing of an investment," International Journal of Production Economics, Elsevier, vol. 252(C).

    More about this item

    Keywords

    debt; innovation; industry dynamics; growth;
    All these keywords.

    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:chf:rpseri:rp1979. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Ridima Mittal (email available below). General contact details of provider: https://edirc.repec.org/data/fameech.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.