Money for nothing: how firms have financed R&D-projects since the Industrial Revolution

Bakker, Gerben (2013) Money for nothing: how firms have financed R&D-projects since the Industrial Revolution. Economic History working paper series (182/2013). Department of Economic History, The London School of Economics and Political Science, London, UK.

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Abstract

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 Alfred Chandler (1962), Douglass North (1981) and Oliver 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:	Monograph (Working Paper)
Official URL:	http://www.lse.ac.uk/economicHistory/workingPapers...
Additional Information:	© 2013 The Author
Divisions:	Accounting Economic History
Subjects:	H Social Sciences > HG Finance
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:	21 Nov 2013 14:28
Last Modified:	15 Sep 2023 23:30
URI:	http://eprints.lse.ac.uk/id/eprint/54518

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