This paper tests for the importance of cash flow on investment in fixed capital and R&D using firm-level panel data in two countries between 1985 and 1994. For German firms, cash flow is not informative in simple econometric models of fixed investment or R&D. In identical specifications for...

This paper analyzes differences in R&D spending and in the impact of R&D on productivity between German and UK firms. We confirm that German firms spend significantly larger amounts on R&D than their UK counterparts, even after controlling for firm size and industry effects. Using a dynamic...

Using a dynamic model of a step-by-step innovation race between financially constrained firms, I study how financial constraints affect innovation activity. The novel theoretical results derive from an analysis of the interaction between the incentive effect of competition on innovation and the...

We provide a formal analysis of the notion that conglomerates are more ‘entrenched’ as they have ‘deeper pockets’. Using the financial contracting model of Bolton and Scharfstein (1990), we can isolate two effects that confirm this conjecture: the pooling of cash flows, which allows to...

In this study we examine whether a workplace can induce good or bad attitudes among its employees and whether any such ¿workplace attitudes¿ affect economic outcomes. This study analyzes responses of thousands of employees working in nearly two hundred branches to the emp loyee opinion survey...

The world-wide inflation in executive compensation in recent years has been accompanied by an increase in the prevalence of long-term incentives. This article demonstrates how the subjectively perceived value of long-term incentives is affected by risk aversion, uncertainty aversion, and time...