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 Unpublished.

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Abstract

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Journal or Publication Title:	Unpublished
Publisher:	Unpublished
Official Date:	October 2007
Dates:	Date Event October 2007 UNSPECIFIED
Number of Pages:	58
Status:	Not Peer Reviewed
Access rights to Published version:	Open Access (Creative Commons)
Description:	Working paper.

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