Financial dependence and innovation: The case of public versus private firms

Viral Acharya, Zhaoxia Xu

Research output: Contribution to journalArticlepeer-review


In this paper, we examine the relation between innovation and a firm's financial dependence using a sample of privately held and publicly traded US firms. We find that public firms in external finance dependent industries spend more on research and development and generate a better patent portfolio than their private counterparts. However, public firms in internal finance dependent industries do not have a better innovation profile than private firms. The results are robust to various empirical strategies that address selection bias. The findings indicate that the influence of public listing on innovation depends on the need for external capital.

Original languageEnglish (US)
Pages (from-to)223-243
Number of pages21
JournalJournal of Financial Economics
Issue number2
StatePublished - May 2017


  • Financial dependence
  • Innovation
  • Private firms
  • Public firms
  • R&D

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics
  • Strategy and Management


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