Trust and R&D investments: evidence from OECD countries

Gideon Ndubuisi*

*Corresponding author for this work

Research output: Contribution to journalArticleAcademicpeer-review

5 Citations (Web of Science)

Abstract

This paper examines two potential mechanisms - access to credit and reduction in relational risks - through which social trust can affect R&D investments. Social trust can increase R&D investments by expanding firms' access to external finance with which they can use to fund promising R&D projects. It can also increase R&D investments by reducing relational risks that expose firms to ex-ante and ex-post holdups or expropriation risks. Using industry-level data on R&D investment intensities in 20 OECD countries, I test these mechanisms by evaluating whether more external finance dependent and relational risk vulnerable industries exhibit disproportional higher R&D investment intensities in trust intensive countries. The results indicate that external finance dependent industries and relational risks vulnerable industries experience relatively higher R&D investment intensities in trust-intensive countries. Therefore, the results underline access to external finance and reduction in relational risks as causal pathways linking social trust and R&D investments.
Original languageEnglish
Article number1744137420000156
Pages (from-to)809-830
Number of pages22
JournalJournal of Institutional Economics
Volume16
Issue number6
DOIs
Publication statusPublished - Dec 2020

Keywords

  • Access to credit
  • innovation
  • R&amp
  • D
  • relational risks
  • trust
  • FINANCIAL DEPENDENCE
  • SOCIAL TRUST
  • INNOVATION
  • CONTRACTS
  • GROWTH
  • CREDIT
  • TRADE

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