THE IMPLICATIONS OF DEBT HETEROGENEITY FOR R&D INVESTMENT AND FIRM PERFORMANCE
An assumption in prior research is that debt is homogeneous and provides inappropriate governance for R&D investments. We argue that debt is heterogeneous: although transactional debt does indeed impose strict contractual constraints that provide inappropriate governance for R&D investments, relational debt has very different characteristics that provide more appropriate governance. Using a sample of Japanese firms, we find that firms that align their debt structures with their R&D investments perform better than those that are misaligned. Furthermore, firms tend to align their debt structure with R&D investments, but only after deregulation permits relatively free access to various types of debt.
David, Parthiban1,2 pdavid@ou.edu?O’Brien, Jonathan P.3?Yoshikawa, Toru4
[1]Holds the Rath Chair in Stategic Management at the University of Oklahoma;[2]Associate Professor , University of Oklahoma;[3]Lecturer at University College Dublin;[4]Associate Professor at McMaster University
