An assumption in prior research is that debt is homogeneous and provides inappropriate governance for R&D investments. We argue that debt is heterogeneous: although transactional debt does indeed impose strict contractual constraints that provide inappropriate governance for R&D investments, relational debt has very different characteristics that provide more appropriate governance. Using a sample of Japanese firms, we find that firms that align their debt structures with their R&D investments perform better than those that are misaligned. Furthermore, firms tend to align their debt structure with R&D investments, but only after deregulation permits relatively free access to various types of debt.
Capital structure, institutional investors, corporate governance, development projects, cost, innovation, strategy, agency, boards, US
Corporate Finance | Strategic Management Policy
Strategy and Organisation
Academy of Management Journal
Academy of Management
DAVID, Parthiban; O'Brien, Jonathan P.; and YOSHIKAWA, Toru.
The implications of debt heterogeneity for R&D investment and firm performance. (2008). Academy of Management Journal. 51, (1), 165-181. Research Collection Lee Kong Chian School Of Business.
Available at: http://ink.library.smu.edu.sg/lkcsb_research/2909
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