Motives for forming research & development financing organizations

Abstract

We study the decision to fund R&D through a separate financing organization (an ‘RDFO’) that takes the form of either a limited partnership or a corporation. The RDFO offers tax and financial reporting benefits. As a form of external funding, it also creates moral hazard and adverse selection problems (information costs). Using convertible debt as a comparative form of external funding, we find that debt-related (but not equity-related) financial reporting benefits affect the decision to form RDFOs, the evidence is mixed on whether taxes influence the formation decision, and the information costs of RDFOs restrict their use.

Cite this work

No public copy is stored for this record, so only the metadata is cited.

Stored only when both papers are in the corpus — 63 citations exist upstream.

Papers that cite the same references — the relational fallback while embeddings are still backfilling.