Innovation races and the strategic role of cash holdings : evidence from pharmaceutical patents
Schroth, Enrique and Szalay, Dezsö (2007) Innovation races and the strategic role of cash holdings : evidence from pharmaceutical patents. Working Paper. Unpublished.
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Firms that race to innovate first may hold cash not only to invest timely but also to do it faster than the competitors, pushing them to hold more cash. We use data from US patents and their citations to identify and measure the dependency of innovation success on cash holdings in such races. We find that a firm's cash holdings increase its probability of winning a race while its rivals' cash decrease it. The cash sensitivity of winning increases through the mid 80s and the 90s. This increase is due to the increased concentration of incumbency strength among fewer incumbents. Hence, cash holdings have become strategically more important for the average, R&D-intensive, firm.
|Item Type:||Working or Discussion Paper (Working Paper)|
|Subjects:||H Social Sciences > HB Economic Theory|
|Divisions:||Faculty of Social Sciences > Economics
Other > Learning and Development Centre
|Library of Congress Subject Headings (LCSH):||Corporations -- Finance, Patents, Innovation|
|Journal or Publication Title:||Unpublished|
|Number of Pages:||58|
|Status:||Not Peer Reviewed|
|Access rights to Published version:||Open Access|
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