The consensus that innovation is an essential strategy for firms, which aim to competitively survive over the long term, motivates growing literature to understand the drivers of firms’ innovation outputs. It is widely acknowledged that access to financial sources is fundamentally important for the survival of innovative firms. The lack of financial support may prevent the firms from entirely pursuing innovation activity and producing innovative outputs. However, this is rarely addressed in the finance literature. Focusing on both types of financing sources (internal and external), this study investigates their influence on firms’ innovation outputs. Leveraging on the spirit in Pecking Order Theory, this study proposes that firms adopt a hierarchy between types of financing from internal or self-financing to external, starting from low risk to risky debts and followed by the issuance of shares on their efforts in financing innovation and producing the outputs. Poisson regression results, using a sample of 113 manufacturing firms listed in JASDAQ market of the Tokyo Stock Exchange, revealed that both financing sources (internal and external) are important in driving volume and value of firms’ innovation outputs. However, the reliance of firms on self-generated financing conquers. This study, using patent-based data (application, publication, citation) to estimate firms’ technology outputs, also finds the complementary power of debt financing as an important financial source, particularly when firms’ internal financing source has exhausted. The findings of this study offer support to the assertion in the Pecking Order Theory concerning the risk inherited in the different financing sources.
This study investigates whether patents can be a useful signaling tool for the IPO performances among high- and low-tech firms. Literature has provided a wealth of evidence confirming a significant relationship between patent signal and capital-raising success for US and EU venture capital-backed firms and start-ups in specific industries. Therefore, this paper focuses on the IPO firms from a more risk-averse market, Japan, to fill in the gaps in the literature, examining the signaling effect of patent applications prior to initial public offering (IPO) to the amount raised at IPO. Moreover, we examine whether patent applications prior to IPO from high-tech have relatively weaker signaling effects to compare with low-tech IPOs. Using the OLS model for 338 Japanese IPOs listed between 2000 and 2015, the result shows a robust and positive association between the number of patents before an IPO and the amount of cash raised during the IPO. The finding confirms that patents are a reliable signal for IPOs in the Japanese context. Using OECD industry categorization to classify high-tech and low-tech IPOs, our OLS result found that the interaction impact between the high-tech dummy and the quantity of patent applications before IPO is significantly negative to the amount of cash generated at IPO. The findings hold for a new set of high-tech and low-tech firms when we used a new industrial categorization proposed by Thomson Reuters, leading us to conclude that for the Japanese companies that belong to the high-tech industry sector, patenting activities fail to have a positive signal for the IPO.
scite is a Brooklyn-based organization that helps researchers better discover and understand research articles through Smart Citations–citations that display the context of the citation and describe whether the article provides supporting or contrasting evidence. scite is used by students and researchers from around the world and is funded in part by the National Science Foundation and the National Institute on Drug Abuse of the National Institutes of Health.
customersupport@researchsolutions.com
10624 S. Eastern Ave., Ste. A-614
Henderson, NV 89052, USA
Copyright © 2024 scite LLC. All rights reserved.
Made with 💙 for researchers
Part of the Research Solutions Family.