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Financing R&D in mature companies: an empirical analysis

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We study financing patterns of publicly traded R&D-intensive manufacturing firms in Israel. We further characterize R&D-intensive firms by size, physical capital intensity, and whether they issued stocks in the United States, asking whether these features are associated with particular financing patterns. To address these issues, we present, for the first time, adjusted flow of funds charts that treat R&D expenses as a capital outlay (rather than an operating cost that reduces profits, as standard accounting principles prescribe). We also address the question of how R&D inputs should be measured - using R&D expenses or R&D personnel. We construct both expenditure- and personnel-based R&D measures for each firm in our sample, and investigate to what extent these measures are mutually consistent.
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Keywords: Cash flow; Equity; Financing; Flow of funds; Government grants and subsidies; R&D

Document Type: Research Article

Affiliations: 1: Research Department, Bank of Israel 2: Berglas School of Economics, Tel Aviv University, 69978 Tel Aviv, Israel

Publication date: 01 October 2003

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