chapter  14
22 Pages

R & D Intensity and Firm Finance: A US–UK Comparison

WithJohn Board, P. J. Robert Delargy, Ian Tonks

In this chapter, the authors examine the link between a firm's debt-equity ratio and its R & D expenditure, comparing the results to those from similar tests for the United States (US). They compare the international differences between the financing structures of those firms who are relatively R & D intensive, those that are relatively non-intensive R & D investors and those which perform no R & D at all. The authors show that there are marked differences between the United Kingdom (UK) and US financing structures and suggest that UK firms may under-utilize financial instruments such as convertibles. They explore regression analysis of two cross-sectional samples, one for the US and another for the UK each consisting of a mixture of R & D-intensive and low- R & D firms to examine the relation between the gearing ratio and the intensity of R & D expenditure.