We examine the role of debt as a governance mechanism in balancing exploration and exploitation. We argue that while equity is conducive to uncertain exploration critical for innovation, debt provides countervailing incentives for engaging in exploitation by imposing cash flow obligations and the threat of bankruptcy. As a consequence, debt becomes a vital instrument in directing innovation along the optimal trajectory, while preventing the balance from shifting too far toward suboptimal exploration. To support our arguments, drawing on patent data, we first demonstrate that a firm’s leverage is positively related to knowledge exploitation activity as reflected in its self-citations. Next, we show that firms that have potentially engaged in suboptimal exploration, as manifest in underutilized stocks of proprietary knowledge, are likely to experience leverage increases in the short run, and these leverage increases in turn result in subsequent increases in self-citations. These effects are consistent with firm value indicating that equity holders value the role of debt in stimulating exploitation. Our study draws attention to the complementary roles of equity and debt as governance mechanisms in balancing exploration/exploitation, while outlining the role of debt in innovation in greater depth.
One of the main concerns in nanotechnology is the utilization of nanomaterials in macroscopic applications without losing their extreme properties. In an effort to bridge the gap between the nano- and macroscales, we propose a clever fabrication method, the inverted floating method (IFM), for preparing freestanding chemical-vapor-deposited (CVD) graphene membranes. These freestanding membranes were then successfully suspended over a gap a half-millimeter in diameter. To understand the working principle of IFM, high-speed photography and white light interferometry were used to characterize and analyze the deformation behaviors of the freestanding graphene membranes in contact with a liquid during fabrication. Some nanoscale configurations in the macroscopic graphene membranes were able to be characterized by simple optical microscopy. The proposed IFM is a powerful approach to investigating the macroscopic structures of CVD graphene and enables the exploitation of freestanding CVD graphene for device applications.
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