Outsourcing innovation and the role of bank debt for SMEs

Elena d’Alfonso Silvia Giannangeli

Working Paper Series
n. 28 ■ May 2012

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Theoretical framework 3. 28 .MAY 2012 ■ 2 .Contents Abstract 1. Data and empirical methodology 4. Results and discussion 5. Conclusions 3 4 6 9 12 14 WORKING PAPER SERIES N. Introduction 2.

D22. We use a sample of 2549 manufacturing SMEs located in Italy and find support for our hypotheses.Outsourcing innovation and the role of bank debt for SMEs Elena d’Alfonso Silvia Giannangeli UniCredit Corporate Analysis Abstract This paper extends the extant literature on R&D outsourcing by investigating the role played by the use of bank debt as a financing source for R&D. 28 . finance. potentially reducing asymmetric information problems between the firm and its lenders and increasing asset redeployability. In particular. we argue that in imperfect capital markets. KEYWORDS: SMEs. innovation. contractually stated R&D may expand the borrowing capacity of small and medium-sized enterprises (SMEs). we contend that the specific features of the bank-firm relationship can moderate the relationship between the decision to outsource R&D and the decision to finance R&D using bank debt. Moreover. outsourced. outsourcing JEL CLASSIFICATION:C25. L24. G30.MAY 2012 ■ 3 . O30 WORKING PAPER SERIES N.

and medium-sized firms (SMEs) envisaged tough times during the current financial crisis. Very little attention has been paid to the WORKING PAPER SERIES N. 1996. 2008. therefore. investigating the drivers of the choices between technology “buy” or “make” (Pisano. SMEs must continually develop new products and services (O’Reagan and Kling. A growing part of the economics and management literature has concentrated on the operational mode of introducing R&D into the production process. To overcome difficult times and maintain their competitive advantage. For example. the outsourcing strategy may lead to problems of monitoring costs due to potential opportunistic behavior of R&D suppliers (Pisano. Given the degree of resource intensity required for innovation and the high pace of technology diversification. which often prevails in the context of research and innovation. Veugelers. intellectual property rights and appropriability problems may make external R&D unattractive (Arora and Gambardella. Lokshin et al. However. Cassiman and Veugelers. 2005). Moreover. knowledge sources outside the boundaries of the firm are very important for SMEs. 2011). 2006. Moreover. 1997. however. many SMEs may consider acquiring knowledge and technology from external sources (Vermeulen. 2006. 28 .1. The credit slowdown and the rapidly changing business environment have created new and difficult challenges for preserving and expanding the market position of innovative SMEs. 2002). As a matter of fact.. Introduction Small. Grimpe and Kaiser. externalizing R&D also has potential disadvantages. 1990. new product development may be costly due to lacking capabilities. 2006). thus reducing the time-to-outcome of a research project.. 2010). Lokshin et al. 1990. thus overcoming the potential limitations of in-house R&D budgets (Love and Roper. 2002. External R&D links may also be a useful method of searching the technological environment. 2010: Hsuan and Mahnke. Gassmann et al. resorting to external research and development allows access to the economies of scale and scope available to specialist research organizations. Ulset. 1990). Love and Roper. A part of the literature focused on the motives for technology “buy” rather than “make” and investigated the complementarity or substitutability of the two approaches (Arora and Gambardella. Cassiman and Veugelers. The use of external R&D sources may have several advantages. Piga and Vi¬varelli. For many SMEs. outsourcing R&D may reduce the fixed costs of innovation. possibly permitting access to improved technology developed outside the boundaries of the firm (Veugelers. 1997.MAY 2012 ■ 4 . 2004. The results of the 2008 Community Innovation Survey collected by the European Union in fact confirm that more than half of the SMEs interviewed consider external information sources highly important for their innovative activities. 1990. 1996).. 1990. These studies have indicated that there is a clear trade-off between the advantages and costs of outsourcing as opposed to conducting in-house R&D activities. as emphasized by the transaction cost theory under the conditions of asymmetric information. Arora and Gambardella. For example. This paper extends the extant literature and contributes to it by investigating a dimension that has been largely neglected in the studies on R&D outsourcing. Cassiman and Veugelers. the outsourcing of R&D has become a common practice (Hagedoorn. 2011). 2008).

the empirical evidence found by this study sheds light on a potential transmission channel of credit cycles and the banking system at large on firm innovation and R&D strategies. our hypothesis is that the use of credit to finance R&D will increase the probability of adopting a “technology buy” strategy when the relation between the innovative borrowing SME and its lenders is particularly weak. also need to make a third important decision. We find a positive impact of bank debt on outsourcing R&D. we argue that the choice of financing R&D using bank debt will favor the decision to outsource R&D. capital markets are far from perfect (see. which is how to finance the R&D. how to make that investment (Love and Roper. The main tenet behind this hypothesis is that a more intense relationship can reduce information asymmetry problems. 1988 and the subsequent research). Section 3 describes the data and explains the empirical strategy. We argue that asymmetric information problems plaguing the relationship between borrowers and lenders are particularly important in the financing of R&D. we contend that the specific features of the bank-firm relationship can moderate the decision to outsource R&D and the choice to finance R&D using bank debt. Firms. Fazzari et al. Section 4 discusses the main results. in perfect capital markets. However. 28 . The objective of the present paper is to investigate whether the latter decision has an impact on the choice of the R&D mode. they must decide how much to invest in R&D. funding concerns should not affect a firm’s R&D choices. WORKING PAPER SERIES N. a period when SMEs are likely to have faced more severe challenges both for their business environments and their demands for credit. This relationship becomes insignificant for high levels of bank-firm relationship intensity. and second. however. 2002). The empirical evidence may be of particular interest as the observation period overlaps with the outset and first phase of the current financial crisis. Thus. Firms engaged in innovation face several important decisions. First. As clearly stated by Hall (2002). The paper is organized as follows: Section 2 discusses our theoretical framework and hypotheses.role played by the R&D financing strategy on the choice of a firm’s R&D mode. Second.. In particular. The empirical results corroborate our hypotheses. The contribution of this paper to the extant literature is twofold. thus reducing the role of bank debt as a determinant of R&D outsourcing.MAY 2012 ■ 5 . for instance. contractually stated R&D may reduce information asymmetries and improve the borrowing capacity of innovative SMEs. Moreover. and Section 5 concludes. turning to external. it investigates a potential driver of R&D outsourcing that has been largely neglected by previous studies. In this context. First.

1996).2. when R&D is conducted in-house. thus minimizing transaction costs for the outsourcing firms. 1989). 1990. Sharing information about on-going research projects could. Cost-minimizing outsourcing contracts are likely to embody conditions both on the outcome and on the suppliers’ behavior that will potentially convey useful information for evaluating the financial risks attached to the projects (Ulset.MAY 2012 ■ 6 . but they may also be the result of the use of credit as a financing source for innovation. there may be a wedge between the external and internal cost of capital required for backing R&D investments. significant trade-offs affect the decision of whether to outsource R&D projects (Pisano. Asymmetric information and moral hazard problems may prevent the financial sector from properly and accurately evaluating and monitoring firms.1 Outsourcing R&D and the use of bank credit A large. In the presence of asymmetric information. As posited by Hall (2002) and Hall and Lerner (2009). and the borders between innovation and ordinary activity may be blurred. 2002). innovation scale. Furthermore. in fact. Tapon. Theoretical framework 2. one of the main problems faced by external investors is the uncertainty of the returns on innovation investment. Borrowers have a superior set of information about the quality of their firm’s innovative projects and may be unwilling to share such information with lenders. eventually limiting a firm’s innovation activity. thus potentially making the uncertainty of the results higher. 28 . market structure. or input costs (Love and Roper. 2002). the final objectives of the project and the monitoring steps must be clearly stated from the beginning as the costs and the time-horizon within which the project must be accomplished must be explicitly stated in the contract. Evaluation and monitoring problems faced by the financial sector may lessen in the case of external R&D projects as it may be easier to sort out the quality of projects that are disembodied from the firm (Cassiman and Veugelers. however. not only the decision about how much to invest in R&D but also the decision about the mode of R&D activities may depend on the availability and use of different financial resources. R&D investments seem to particularly exacerbate the problems faced by investors as these types of investments involve assets that are both intangible and. As a result. According to transaction cost theory. reduce the returns of research output in a competitive market (Hall. R&D outsourcing may be vulnerable to principal-agent problems between the outsourcing firms and the firms’ suppliers. The decision to outsource part of a firm’s R&D activities may not be the result only of factors related to the firm’s technological capabilities. a detailed and careful contractual governance must be instituted. Piga and Atzeni (2007) find that lenders do not look favorably on large in-house R&D activities of borrowers as they entail a WORKING PAPER SERIES N. 2007). however. Contrarily. both the objectives and the implementation of innovation projects are less visible to external financers. Once R&D projects are externalized. When R&D is acquired from external suppliers. highly firmspecific. well-established theoretical and empirical compilation of literature has indicated that financing innovation is more difficult than financing ordinary investment.

A large amount of literature has focused on analyzing. Mocnik (2001). 2002. For example. One of the most relevant characteristics of investments is the time horizon. 2007) is more likely to involve generic.. Furthermore. there are a variety of reasons to put forth the following hypothesis: Hypothesis 1: In the presence of asymmetric information. thus increasing the firm’s borrowing capacity (Tirole. the uncertainty on returns are typically high because they are often related to the knowledge embedded in the human capital of the employees that would be lost if they were to leave the firm. thus increasing a firm’s willingness to disclose information about technology. knowledge and future business opportunities (Tadesse. Tadesse. Hence. This is clearly a long-term project that involves the entire internal organization and management of the firm. R. thus exacerbating the information asymmetries between lender and borrower. finds evidence of a negative relationship between debt ratio and firm-specific assets. More standard and less firm-specific assets offer lenders some clear advantages in terms of evaluation and redeployability. non-firm-specific. with respect to a sample of manufacturing Slovene firms. at a micro level. it is not WORKING PAPER SERIES N. they offer poor guarantees for lenders. 2. even in bank-based systems. the use of bank debt for financing research increases the probability of outsourcing R&D. 2006. In such projects. but none of them have considered the impact on the R&D strategic choices with respect to research externalization. 2007). 2007). the effects of bank-based versus market-based financial systems on innovation (Carlin and Mayer. However. 2009. Clearly. 2003 Levine. there are those financing instruments that might fit better than others with the financing needs embedded in an external or an in-house R&D investment.large proportion of intangible assets and provide strong incentives to resort to secrecy. One of the main arguments in favor of the higher suitability of bank-based systems in fostering innovation is the fact that banks are more capable of preserving confidentiality. 2006). 2007). how the banking system can affect a firm’s innovation decisions (Giannetti. A few studies have analyzed. 28 . this requires investors to seek a higher rate of return. This circumstance has clear consequences for firm lenders. 1989). Benfratello et al.2 The role of bank-firm relations The potential economic outcomes of asymmetric information between innovative SMEs and their lenders can be moderated by the characteristics of the bank-firm relationship. already-sufficient standard knowledge to minimize both ex-ante search and negotiation and ex-post monitoring and contract enforcement costs (Mowery and Rosenberg. highly firm-specific assets cannot be redeployed readily as they are tailored to a firm’s needs and generally do not convey sufficient physical collateral. which could induce firms to privilege internal financial sources.MAY 2012 ■ 7 . innovative firms must establish a department and hire highly skilled employees. For creating internal R&D. at a macro level. From the viewpoint of the demand for credit for R&D. disembodied technology acquisition through R&D outsourcing (Cassiman and Veugelers. Summarizing. for example. Herrera and Minetti. however.

some of which are the duration. 28 . reducing the above-mentioned asset specificities’ differences between outsourcing and internal R&D. The micro level analysis on bank-firm relationships is not. the firm-bank relationship can be a relevant factor in reducing the asymmetric information and can moderate the bank debt impact on the strategic choice of outsourcing research. If.straightforward that the appropriate incentives for information sharing between borrowers and lenders are provided. 2006). number of banks used and the share of debt with each bank. a weak relation with the bank reduces innovation. Giannetti (2009) finds evidence that in high-tech sectors. WORKING PAPER SERIES N.MAY 2012 ■ 8 . information sharing may not take place. in fact. A closer relationship with the bank implies a lower impact of asymmetric information. which can be defined by a variety of factors. Thus. reduces a firm’s financial constraints and improves liquidity because it reduces information asymmetries (Castelli et al. an ignorable factor in innovative activity. A strong relation with the bank. Information sharing depends on the specific nature of the relationship. in the second part of our analysis we test the following: Hypothesis 2: A stronger bank-firm relationship moderates the role of bank debt in explaining the outsourcing of R&D. For example. for example. therefore. the firm is financed through multiple banks. Even in a bank-based country such as Italy.

the first hypothesis put forward in Section 2 states that. Our empirical strategy is based on estimating a discrete choice model for the firm’s decision to outsource R&D. In addition to the variable Bank. IPR protection ((D_IPR)): Intellectual property right protection (IPR) could. In fact. The present analysis draws from this large database and analyzes 2549 manufacturing SMEs located in Italy . The data refer to 2007-2009 and were collected during the first semester of 2010 through a CATI-based questionnaire filed by 15000 firms in Europe. We estimate a probit equation model taking the following form: D_ExtR&D = 1 (xγ + u1 >0) with u1 ~ N(0. D_ExtR&D. R&D managers increasingly use the possibilities of 0 (xβ + u1 ≤0) (1) WORKING PAPER SERIES N. in the presence of asymmetric information. In the current analysis. the use of bank debt for financing research increases the probability of outsourcing R&D. 2009).3. These include Firm absorptive capacity: A robust literature finds that the more pronounced the ability of an organization to absorb the new knowledge generated outside its boundaries. The database contains qualitative and quantitative information on a wide spectrum of aspects regarding firms’ activities. therefore. is defined as taking a value of 1 if the firm partly or entirely outsources its R&D activities during the triennium. we adopt a direct measure of the share of R&D expenses financed using bank debt (Bank). indicate high technology spillovers at the industry level and. the set of explanatory variables in (1) includes several control variables that have been investigated by previous empirical literature as potential drivers of R&D outsourcing. the higher the incentives to externalize R&D activities (Cohen and Levinthal. indeed. ICT endowment (D_ICT): R&D outsourcing may be favored by a sufficient information and communications technologies (ICT) endowment. 1994. 1989. Cassiman and Veugelers. we adopt two different proxies for a firm absorptive capacity: the share of graduated employees (Grade_employees) and the R&D expenses-to-turnover ratio between 2007 and 2009 (R&Dintensity). Hypothesis 1 predicts that the coefficient of variable Bank will be positive and significant. including innovation and R&D choices..1) Clearly. 28 . To test whether the outsourcing decision is influenced by the R&D financing mix. 2002).MAY 2012 ■ 9 . 1987. and zero otherwise. Data and empirical methodology The empirical analysis is based on the EU-EFIGE/Bruegel-UniCredit dataset. which gathers information on manufacturing firms located in several European countries. 2010). Schmidt. higher concerns at the firm level for appropriability of innovation output (Levin et al. The latter is likely to reduce the firm’s propensity for outsourcing R&D (Lai et al. Arora and Gambardella. The dichotomous outcome variable.

Accordingly. 2001). D_SOUTH: Several studies have noted that localized social capital may influence the economic behavior of individuals and firms (see. 2011). Business group (D_Group): Being part of a business group eases outsourcing agreements by reducing transaction costs within the group and improving appropriability conditions over R&D results. defined in accordance with the OECD technological classification as high-tech (HTECH). 2004 and subsequent research). thus minimizing principal agent problems. (2011) determined that firm location in a region with high social capital positively influences the effectiveness of externally acquired R&D on innovation. we adopt a probit model with sample selection (also known as “Heckman-probit model). and low tech sectors (LTECH) . They are also more likely to externalize R&D (Fritsch and Lukas..connecting and coordinating R&D initiatives via remote sources of innovation (Oshri et al. These firms may also find it more difficult to fully exploit the commercial benefits from successful R&D (Love and Roper. 2002). medium-low tech (MLTECH). As with other technological advances that reduce the transaction costs of exchanging innovation problems and solutions across company boundaries.1) 0 (zγ + u2 ≤0) (2) WORKING PAPER SERIES N. Guiso et al. 28 . a firm choice to outsource part of its R&D projects can be observed only if a firm has chosen to perform some form of R&D.. Finally.e. Not controlling for such sample selection problems would mislead the interpretation of the results because two different types of zeros in the D_ExtR&D variable would be mixed (i. We further control for firm size (Size). we control for industrial sector. 2009). In fact. where the probability of performing R&D activities is estimated upon the first step (Heckman 1979).MAY 2012 ■ 10 . In a recent paper Laursen et al. for instance.. 2004). This argument may be very relevant in Italy’s case. Firms that outsource part of their production process approach are likely to own the required capability for managing external suppliers. Outsourcing (D_Outsourcing): Transaction costs of organizing external R&D will likely be higher in smaller firms or those firms in a relatively weak market position. The selection equation takes the following form: D_R&D = 1 (zγ + u2 >0) with u2 ~ N(0.. To account for censoring problems due to the limited observability of variable D_ExtR&D. firms belonging to business groups may be less reluctant to buy R&D from structures that are external to the firm but belong to the same group. measured as the natural logarithm of the average number of employees during the observation period. ICT does promote the emergence of external markets for innovation (Hsuan and Mahnke. medium-high tech (MHTECH). those firms performing R&D in-house and those firms not performing R&D at all). where the northern regions highly outperform the southern regions as for the endowment of localized social capital (Guiso et al.

family ownership (D_FAMILY). The EU-EFIGE/Bruegel-UniCredit dataset offers a nice proxy for the bank-firm relationship.where variable D_R&D is a dichotomous variable taking value of 1 if the firm performed some form of R&D during the triennium 2007 to 2009. or Export). The second hypothesis put forward in Section 2 posits that a stronger bank-firm relationship moderates the role of bank debt in explaining the outsourcing of R&D. 2007. Table 5 shows the correlation matrix among all explanatory variables. Two subsamples are thus identified: the “low intensity” group composed of 1254 SMEs (corresponding to firms with more than three banks) and the “high intensity” group composed of 1295 firms (corresponding to SMEs maintaining relations with a maximum of three banks). we estimate the abovediscussed model (1)-(2) and compare the coefficients of the variable Bank. the share of turnover sold abroad. 1994).. WORKING PAPER SERIES N. the number of banks used by each SME in the sample. In order to test Hypothesis 2. that is. thus obtained. To empirically test Hypothesis 2. we breakdown the full sample into two subsamples and test whether the effect of bank debt is larger when SMEs lack an intense relationship with their financers. 28 . The results are shown in table 3 and table 4 in the next section. we include the dichotomous D_SOUTH location indicator and a set of dummy variables for the sector technological intensity. Table 1 summarizes the explanatory variables used in the estimationof model (1)-(2) and the expected signs of explanatory variables in (1). (2008) and include firm size (SIZE).e. we expect that variable Bank will have a larger effect on the probability of outsourcing R&D in the “Low-intensity” subsample. particularly Hall et al. Petersen and Rajan. The sample is split into two subgroups identified based on whether the number of banks used by each SME lies below or above the median value in the sample. The number of lending relations has been used as a proxy for the intensity of the bank-firm relation: borrowing from multiple banks can reduce a bank’s incentives to generate information from the relationship with a firm (Herrera and Minetti. Finally. while table 2 shows the descriptive statistics of the variables discussed thus far. The explanatory variables in equation (2) are drawn from the economics of innovation literature. firm human capital (Grade_employees).MAY 2012 ■ 11 . age (Age Class 0-10 and Age Class 10-20). a dichotomous variable taking value of 1 if the firm has mainly foreign competitors (D_Foreign) and the export intensity (i. Clearly..

The second column in Table 3 summarizes the estimation results of the selection equation. Among the control variables. all of the variables related with transaction cost reduction (the use of IPR. thus suggesting that in these cases. R&D activities are found to be favored by more skilled human capital and by the firm’s exposure to international competition. increasing the share of R&D expenditure covered using bank credit would increase the probability of outsourcing R&D by 1%. according to the arguments discussed in Section 2. on average. 28 . Moreover. The age of the firm seems not to be associated with R&D activity in the firms of this sample. large firms are found to be more likely to undertake R&D activities. we find that the probability of outsourcing R&D is higher in SMEs that buy using outsourcing agreements as part of their production process.MAY 2012 ■ 12 . In accordance with transaction cost theory. and. outsourcing part of the production process and also the ICT endowment) are found to be notably significant only in the “high-intensity” subgroup. thus confirming much of the empirical literature on the relationship between size and innovation (Acs and Audretsch. Similarly. we find only weak evidence in favor of the importance of a firm’s absorptive capacity as only the variable Grade_Employees results in a positive value and is statistically significant. Additional support for our hypothesis is delivered by the results obtained after splitting the sample into the two subgroups defined according to the number of banks used during the observation period. belonging to a business group and adopting IPRs enhances the probability of outsourcing R&D. 1988 and subsequent research). Results and discussion Table 3 reports the estimation results for the total sample. deserve some attention.4. whereas insignificance emerges among firms maintaining a more intense relationship with the banking system. High and medium-high firms are more likely to conduct R&D activities than low-intensity firms (baseline in the regression). although not directly related to the hypotheses put forward in this paper. it offers support to the hypothesis that the use of bank debt positively influences the probability of externalizing part of a firm’s R&D activities.. our proxy of social capital and the technological intensity classes are found to have no effect on R&D outsourcing in the sample. The coefficient of variable BANK results in a positive value and is statistically significant. Finally. The problems of asymmetric information may be exacerbated in this case. WORKING PAPER SERIES N. These results. firms located in the southern regions of Italy are generally less involved in R&D. being part of a group. The results in table 4 lend support to this view because a positive relation between R&D outsourcing and the share of R&D expenditures covered by bank credit registers only in the “low-intensity” subsample. Overall. As already discussed. Moreover. maintaining borrowing relations with a number of banks reduces a bank’s incentive to fully exploit the information regarding firm quality and behavior. The calculated marginal effect indicates that. ICT endowment is not found to play any role in stimulating R&D outsourcing. principal-agent problems arising from supplier’s opportunistic behavior may be lower.the nay be a positive influence of the use of credit on the probability to outsource R&D. While the magnitude of this effect is not very large. As for the remainder of the control variables. Contrary to what is emphasized in Hsuan and Mahnke (2011).

therefore. however. WORKING PAPER SERIES N. Lenders may find it easier to sort out the quality of projects when a contract between the innovative firm and its suppliers is set up for the several reasons spelled out in section 2.MAY 2012 ■ 13 . In fact. While it is not possible to control the factors affecting the costs of internal R&D (Love and Roper. 2002). 28 .Contrarily. where only the use of credit and the firm endowment of skilled human capital positively impact the probability to outsource R&D. However. This result does not hold true for any firm in the sample. the empirical evidence supports the hypothesis that outsourced R&D projects may lessen some problems of evaluation and monitoring that typically plague R&D activities and result in potential financing constraints. maintain an intense level of information sharing and choosing whether to outsource part of their R&D projects based on the costs implicit in the different R&D modes. results seem to suggest that firms enjoy a stricter relationship with their lenders and. firms that have weak relationships with their lenders seem to benefit from the positive link between externalized R&D and credit. at least not in the present analysis. none of these factors are found to be significant in the “low-intensity” subsample. Overall. there is clear evidence that the external mode of conducting R&D is favored by lower transaction costs. No role seems to be played by the use of credit in financing R&D.

in the presence of asymmetric information. which are mostly due to the cross-sectional type of data available. Conclusions This paper builds on the management and economics literature on R&D outsourcing and extends it by addressing the role played by R&D financing strategies. knowledge or future business opportunities with lenders. 28 . we found support for the hypotheses that. Our research contributes to the extant literature by investigating a potential driver of R&D outsourcing that has been largely neglected by previous studies. Repeated observations over time would allow to evaluate and compare the robustness of the relationships highlighted by the present study during different phases of the credit cycle. an area that deserves continued investigations. we shed some light on a potential transmission channel of credit cycles on firm R&D strategies. clearly suffers from some limitations. as summarized by a closer bank-firm relationship. Yet. Moreover. Namely. the results found by this study have potentially interesting implications for envisioning new solutions for overcoming the problems of information asymmetries embedded in innovation financing. We believe this result is promising in that it opens the door for envisaging potential developments in the financing markets aimed to reduce the opacity of R&D activities from the viewpoint of lenders. Moreover. this result confirms that firms behavior. may be effective in reduce the well-know problems of market failure in the financing of innovation. The findings suggest in fact that challenging credit market conditions may reduce the viability of the “technology buy” strategy. WORKING PAPER SERIES N. In this context. Furthermore. The analysis. and in particular the adoption of some strategies which facilitate the sharing of information about technology. We consider our contribution a first step in this area of research. however. the use of bank debt for financing research increases the probability of outsourcing R&D. the use of external R&D can be considered a useful mechanism to lessen the problems associated with investment evaluation and monitoring by lenders. this relationship is moderated by the information sharing between the lender and the borrower.5.MAY 2012 ■ 14 .

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Calabria.42 0. Campania.04 2.14 4. Sicilia. Basilicata.50 29.10 0. dummy variable taking value 1 if the firm is part of a group dummy variable taking value 1 if the firm is owned by a family share of turnover sold abroad in 2007-2009 dummy variable taking value 1 if the firm has mainly foreign competitors dummy variable taking value 1 if the firm is located in the South of Italy (Sardegna. industrial design or copyright).54 3.30 0 0 0 0 0 0 0 0 0 0 0 0 1 1 4 Max 1 1 5.97 6.32 5.35 0. Abruzzo.43 7. 0.46 10. trademark.76 22.D_Outsourcing D_ICT D_IPR dummy indicator taking value 1 if the firm purchases her inputs and services from subcontractors via an outsourcing agreement in 2007-2009 dummy indicator taking value 1 if the firm has a broadband connection and use specific software for managing the sales/purchases network dummy variable taking value 1 if the firm adopted some type of protection of intellectual property right (patent.66 0.30 28.95 0.47 0.37 0.51 159 100 100 100 1 1 1 1 1 100 1 1 30 3 30 WORKING PAPER SERIES N.14 0.47 0.60 Min 0 0 2. Dev.39 0.43 28.64 19.04 3. explanatory and sorting variables Mean Dependent variables: D_ExtR&D D_R&D Explanatory varibles: Size Age Bank R&Dintensity Grade_employees D_Outsourcing D_ICT D_IPR D_Group D_Family Export D_Foreign D_South Sorting variable: Lending relations High intensity subgroup: Low intensity subgroup: 0. Molise) x + x + x + D_Group D_Family Export D-Foreign D_South x x x x x x + - Table 2 Descriptive statistics of the dependent.57 0.MAY 2012 ■ 18 .50 0.69 2.34 0.81 0.13 0.35 2. 28 .50 0.78 Std.54 0.22 0.78 15.

064 0.054 0.062 0.093 37.004 0.439 *** 0. total sample Constant Size Age class 0-10 Age class 10-20 Bank ReDIntensity Skilled_Employees D_Outsourcing D_ICT D_IPR D_GROUP D_South D_Family Export D_Foreign Total sample (2549 obs.141 *** 0.079 0.240 *** 1.111 * 0.004 0.073 -0. 28 .019 *** 0.020 0.080 0.542 *** 0.168 -0.172 0.Table 3 Estimation results of model (1) and (2).006 *** 0.021 0.001 0.052 0.670 0.138 0.051 0.060 htech mhtech mltech Wald test LR test rho=0 WORKING PAPER SERIES N.232 *** 0.002 ** 0.353 *** 0. var.:D_R&D -1.165 ** 0.302 *** 0.044 0.MAY 2012 ■ 19 .106 0.007 * 0.001 0.003 0. var.089 0.025 0.037 ** -1.277 *** 0.001 0.084 -0.164 -0.167 * 0.062 0.102 -0.) Outcome equation Selection equation dep.357 *** 0.130 0.106 -0.411 0.: D_ExtR&D dep.110 -0.081 0.

016 *** 0.198 0.246 -0.330 High intensity subgroup (1295 obs.127 0.074 0.002 0.088 -0.530 ** 1.130 0.192 -0.351 *** 0.007 0.015 -0.184 -0.120 0.000 0.087 22. var.152 * 0.098 0.:D_R&D -1.129 0.099 0.113 0.506 0.197 *** 0.128 0.670 WORKING PAPER SERIES N.000 0.372 *** 0.006 0. var.001 0. var.006 0.379 *** 0.144 0.548 ** 0.305 0.212 ** 0.084 0.240 *** 1.162 -0.129 -0.281 ** -1.626 *** 0.056 0.003 * 0.135 0.001 0. var.155 0.) Outcome equation Selection equation dep. High intensity and Low intensity subsamples Constant Size Age class 0-10 Age class 10-20 Bank ReDIntensity ReDEmployees D_Outsourcing D_ICT D_IPR D_GROUP D_South D_Family Export D_Foreign htech mhtech mltech Wald test LR test rho=0 Low intensity subsabpe (1254 obs.188 0.: D_ExtR&D dep.002 0.514 0.110 0.062 -0.125 0.170 0.101 -0.170 0.219 0.004 0.) Outcome equation Selection equation dep.261 0.219 0.296 *** 0.156 0.069 0.066 0.002 0.313 *** 0.088 0.252 0.126 -0.092 0.005 0.268 *** 0.088 0.338 *** -1.104 0.002 ** 0.: D_ExtR&D dep.610 *** 0.005 0.135 0.MAY 2012 ■ 20 .049 0.085 37.472 *** -0.235 0.291 * 0.088 0.117 -0.183 -0.273 ** 0. 28 .173 0.024 *** 0.129 0.094 0.113 0.013 ** 0.007 *** 0.224 * 0.123 0.Table 4 Estimation results of model (1) and (2).108 -0.004 0.209 ** 0.438 ** 0.:D_R&D -1.005 0.002 0.

039 * * * * * * 1.179 0.071 -0.057 * 0.032 -0.028 0.197 -0.000 0.150 * 1.014 * * * * * Age class Age class D_Family 0-10 10-20 1.179 0.006 -0.007 0.213 0.060 -0.061 0.104 0.006 Export D_Foreign Bank R&Dintens Grade_em D_Outso D_ICT ity ployees urcing D_IPR D_Grou * * * * * * * * * * * * * 1.015 -0.094 0.025 0.170 0.099 -0.000 -0.009 -0.025 WORKING PAPER SERIES N.000 -0.052 -0.065 -0.103 * 1.024 -0.178 0.149 0.058 0.184 0.285 -0.056 -0.037 0.121 0.212 0.009 -0.224 0.033 0.MAY 2012 ■ 21 .553 0.095 * * * * * * * * * 1.010 -0.046 -0.062 0.086 -0.021 0.029 * * * * 1.061 * -0.038 * -0.157 0.059 * 0.074 * -0.010 -0.000 0.077 * 0.010 -0.026 -0.000 * 0.014 0.000 * 0.081 0.071 -0.025 0.042 0.000 0.181 0.059 * -0.000 -0.051 0.150 * * * * * * * * * * 1.106 * 1.004 0.143 0.249 0.019 -0.029 -0.145 0.059 * 0.099 0.058 0.009 0.016 0.091 -0.000 0.055 * -0.137 * 0.030 0.060 * 0.012 0.069 * -0.040 0.000 0.008 0.002 0.002 -0.045 -0.087 * * * * * * * * * 1.044 * -0.089 0.006 0.116 -0.069 -0.227 0.155 0.115 0.000 -0.033 0.152 -0.Table 5 Correlation matrix among explanatory variables Size Size Age class 0-10 Age class 10-20 D_Family Export D_Foreign Bank R&Dintensity Grade_employees D_Outsourcing D_ICT D_IPR D_Group D_South htech mhtech mltech 1.116 0.010 -0.000 -0.004 0.049 0.033 -0.074 0.014 1.099 0.205 -0.036 -0.078 0.103 * 0.054 -0.141 -0.012 * * * * * 1.069 -0.015 -0.199 0.086 0. 28 .010 0.023 0.004 0.141 0.013 0.061 * 0.076 0.069 0.051 0.000 0.035 0.

Assistant OGallo.aleati@unicredit.eu Annalisa Aleati .eu Ornella Gallo .external@unicredit.deroni@unicredit.unicreditanduniversities.Scientific Director annalisa.MAY 2012 ■ 22 .eu www. 28 .eu WORKING PAPER SERIES N.eu Info at: unicreditanduniversities@unicredit. 12 20121 Milan Italy Giannantonio De Roni – Secretary General giannantonio.UniCredit & Universities Knight of Labor Ugo Foscolo Foundation Via Santa Margherita.

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