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- Title
Financing behaviour of R&D investment in the emerging markets: the role of alliance and financial system.
- Authors
Alam, Ashraful; Uddin, Moshfique; Yazdifar, Hassan
- Abstract
This paper examines the financing behaviour of research and development (R&D) investments in emerging markets. Drawing on institutional theory and using panel data of generalized methods of moment 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.
- Subjects
RESEARCH &; development; EMERGING markets; FOREIGN investments; INVESTORS; FINANCIAL management; INNOVATIONS in business
- Publication
R&D Management, 2019, Vol 49, Issue 1, p21
- ISSN
0033-6807
- Publication type
Article
- DOI
10.1111/radm.12303