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Money for nothing: how firms have financed R&D-projects since the industrial revolution

Bakker, Gerben ORCID: 0000-0001-6109-0693 (2013) Money for nothing: how firms have financed R&D-projects since the industrial revolution. Research Policy, 42 (10). pp. 1793-1814. ISSN 0048-7333

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Identification Number: 10.1016/j.respol.2013.07.017


We investigate the long-run historical pattern of R&D-outlays by reviewing aggregate growth rates and historical cases of particular R&D projects, following the historical-institutional approach of Chandler (1962), North (1981) and Williamson (1985). We find that even the earliest R&D-projects used non-insignificant cash outlays and that until the 1970s aggregate R&D outlays grew far faster than GDP, despite five well-known challenges that implied that R&D could only be financed with cash, for which no perfect market existed: the presence of sunk costs, real uncertainty, long time lags, adverse selection, and moral hazard. We then review a wide variety of organisational forms and institutional instruments that firms historically have used to overcome these financing obstacles, and without which the enormous growth of R&D outlays since the nineteenth century would not have been possible.

Item Type: Article
Official URL:
Additional Information: © 2014 Elsevier B.V. Creative Commons Attribution License 3.0
Divisions: Accounting
Economic History
Subjects: H Social Sciences > HD Industries. Land use. Labor
JEL classification: N - Economic History > N2 - Financial Markets and Institutions > N20 - General, International, or Comparative
N - Economic History > N8 - Micro-Business History > N80 - General, International, or Comparative
O - Economic Development, Technological Change, and Growth > O2 - Development Planning and Policy > O21 - Planning Models; Planning Policy
Date Deposited: 07 Aug 2013 15:54
Last Modified: 16 May 2024 01:40
Projects: RES-331-25-3012
Funders: Economic and Social Research Council, Advanced Institute of Management Research under the ESRC/AIM Ghoshal Research Fellowship Scheme

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