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R&D and Firm Performance in a Transition Economy

R&D and Firm Performance in a Transition Economy SUMMARY We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk. This stands in contrast to Western Germany where R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Kyklos International Review of Social Sciences Wiley

R&D and Firm Performance in a Transition Economy

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References (29)

Publisher
Wiley
Copyright
Copyright © 2006 Wiley Subscription Services, Inc., A Wiley Company
ISSN
0023-5962
eISSN
1467-6435
DOI
10.1111/j.1467-6435.2006.00346.x
Publisher site
See Article on Publisher Site

Abstract

SUMMARY We estimate the effects of R&D on firms' credit ratings and on financial distress. The main purpose is the comparison of firms in Western Germany and Eastern Germany as a transitional economy. Innovative activity has a positive impact on firm value proxied by ratings in Western Germany, but a negative impact in Eastern Germany. We also consider future financial distress, and find that R&D in Eastern German firms leads to higher default risk. This stands in contrast to Western Germany where R&D enhances future performance. This result is highly politically relevant, since the high level of subsidies present in Eastern Germany may be subject to misallocation.

Journal

Kyklos International Review of Social SciencesWiley

Published: Nov 1, 2006

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