Product Innovation Investment under Bankruptcy Threat

Dawid H, Ippoliti R, Wen X (2023) Universität Bielefeld Working Papers in Economics and Management; 04-2023.
Bielefeld: Bielefeld University, Department of Business Administration and Economics.

Diskussionspapier | Veröffentlicht | Englisch
 
Download
OA 1.26 MB
Abstract / Bemerkung
We analyze the effect of external financing and associated bankruptcy threat on the speed of product innovation in a market characterized by technological and demand uncertainty. In a dynamic market setting we characterize the optimal R&D investment strategy of a monopolistic incumbent firm that can invest to develop a new product with uncertain demand. The size of the R&D investment flow determines the distribution of the stochastic innovation time and at the same time influences the dynamic evolution of firm’s liquidity. If liquidity is negative the firm faces bankruptcy risk. We show that the optimal investment is a U-shaped function of liquidity and characterize under which circumstances it is optimal for the firm to go into debt in order to speed up innovation. Furthermore, we show that, due to the existence of financial frictions, the relationship between the incumbent’s profit on the existing market and the expected innovation time for the new product is non-monotone and follows a titled-z shape. We empirically verify the theoretically derived prediction of a U-shaped relationship between liquidity and investment using a dataset consisting of a sample of 400.000 Italian manufacturing companies.
Stichworte
Product Innovation; Bankruptcy Threat; Optimal Investment; Uncertainty; Dynamic Optimization
Erscheinungsjahr
2023
Serientitel
Universität Bielefeld Working Papers in Economics and Management
Band
04-2023
Seite(n)
63
ISSN
2196-2723
Page URI
https://pub.uni-bielefeld.de/record/2978754

Zitieren

Dawid H, Ippoliti R, Wen X. Product Innovation Investment under Bankruptcy Threat. Universität Bielefeld Working Papers in Economics and Management. Vol 04-2023. Bielefeld: Bielefeld University, Department of Business Administration and Economics; 2023.
Dawid, H., Ippoliti, R., & Wen, X. (2023). Product Innovation Investment under Bankruptcy Threat (Universität Bielefeld Working Papers in Economics and Management, 04-2023). Bielefeld: Bielefeld University, Department of Business Administration and Economics. https://doi.org/10.4119/unibi/2978754
Dawid, Herbert, Ippoliti, Roberto, and Wen, Xingang. 2023. Product Innovation Investment under Bankruptcy Threat. Vol. 04-2023. Universität Bielefeld Working Papers in Economics and Management. Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Dawid, H., Ippoliti, R., and Wen, X. (2023). Product Innovation Investment under Bankruptcy Threat. Universität Bielefeld Working Papers in Economics and Management, 04-2023, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
Dawid, H., Ippoliti, R., & Wen, X., 2023. Product Innovation Investment under Bankruptcy Threat, Universität Bielefeld Working Papers in Economics and Management, no.04-2023, Bielefeld: Bielefeld University, Department of Business Administration and Economics.
H. Dawid, R. Ippoliti, and X. Wen, Product Innovation Investment under Bankruptcy Threat, Universität Bielefeld Working Papers in Economics and Management, vol. 04-2023, Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2023.
Dawid, H., Ippoliti, R., Wen, X.: Product Innovation Investment under Bankruptcy Threat. Universität Bielefeld Working Papers in Economics and Management, 04-2023. Bielefeld University, Department of Business Administration and Economics, Bielefeld (2023).
Dawid, Herbert, Ippoliti, Roberto, and Wen, Xingang. Product Innovation Investment under Bankruptcy Threat. Bielefeld: Bielefeld University, Department of Business Administration and Economics, 2023. Universität Bielefeld Working Papers in Economics and Management. 04-2023.
Alle Dateien verfügbar unter der/den folgenden Lizenz(en):
Creative Commons Namensnennung 4.0 International Public License (CC-BY 4.0):
Volltext(e)
Access Level
OA Open Access
Zuletzt Hochgeladen
2023-04-28T09:00:40Z
MD5 Prüfsumme
3d41b2d490ea2288ec3f5b669fe975d4


Export

Markieren/ Markierung löschen
Markierte Publikationen

Open Data PUB

Suchen in

Google Scholar