Financing behavior of R&D investments in the emerging markets : the role of alliance and financial system

Alam, MA ORCID: https://orcid.org/0000-0002-8260-235X, Uddin, MM and Yazdifar, H 2019, 'Financing behavior of R&D investments in the emerging markets : the role of alliance and financial system' , R&D Management, 49 (1) , pp. 21-32.

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Abstract

This paper examines the financing behaviour of R&D investments in emerging markets. Drawing on institutional theory and using panel data of generalized methods of moment (GMM) estimation for a sample of 302 firms from 20 countries during the period 2003-2015, we find that emerging market firms tend to use internal funds for financing R&D investments. Interesting results emerged when the sample was divided as alliance and non-alliance firms, and bank-based and market-based financial systems. The results show that R&D financing behaves differently for alliance and non-alliance firms. Alliance firms use both internal and external funds for R&D investments, while non-alliance firms do not use external funds. We also document that a country’s financial system influences the choice of available sources of finance. Firms from countries that follow a bank-based financial system tend to rely on external funds while firms from countries that follow a market-based financial system depend more on internal funds for financing R&D investments. This study is important as it provides new evidence on financing R&D investments in emerging countries taking into account the institutional arguments of financing choices, and so should guide stakeholders about appropriate sources of R&D financing.

Item Type:	Article
Schools:	Schools > Salford Business School > Salford Business School Research Centre
Journal or Publication Title:	R&D Management
Publisher:	Wiley
ISSN:	0033-6807
Related URLs:	Publication
Depositing User:	A Alam
Date Deposited:	14 Nov 2017 13:53
Last Modified:	15 Feb 2022 22:38
URI:	https://usir.salford.ac.uk/id/eprint/44320

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