Financial Dependence and Innovation：The Case of Public versus Private Firms 67页
Department of Finance, New York University

Abstract
In this paper, we examine the relation between innovation and a firm’s financial
dependence using a sample of privately-held and publicly-traded firms. We find
that public firms in external finance dependent industries spend more on R&D
and generate patents of higher quantity, quality, and novelty than their private
counterparts, while public firms in internal finance dependent industries do not
have a better innovation profile than matched 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.

Key Words: Private Firms, Public Firms, Innovation, R&D, Finance and Growth, Financial
Constraints.