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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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Identification Number: 182/2013

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
Subjects: H Social Sciences > HG Finance
Sets: Departments > Accounting
Departments > Economic History
Collections > Economists Online
Date Deposited: 21 Nov 2013 14:28
Last Modified: 06 Jan 2014 09:12
URI: http://eprints.lse.ac.uk/id/eprint/54518

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