Andrea Mina (Sant’Anna School of Advanced Studies)
"Innovation and the financing of new firms"
The paper focuses on the capital structure of firms in their early years of operation. Through the lens of agency theory, we study how the pursuit of innovation influences the reliance of firms on different types of finance (founders’ own capital, cash flow, debt, equity and government funding). Panel analyses of data on 7,394 German start-ups show that innovation activities are a strong predictor of the start-ups’ choice of finance. Their effects on the type and order of financing sources depend on the information asymmetries specific to research and development and the market introduction of new products and processes.