The aim of this paper is to evaluate the causal effect of issuing equities on the probability that the firm engages in R&D activity. In financing innovation equity is a better source of external finance than debt. Equity does not require collateral, does not increase moral hazard problems...

This paper evaluates the causal effect of issuing equities on the probability that a firm will engage in R&D activity. Equity is a preferable source of external finance for innovation than debt. It does not require collateral, does not exacerbate moral hazard problems connected with the...