Low-Intensity R&D and Capital Budgeting Decisions in it Firms

Abstract

This paper investigates the extent to which formal capital budgeting methods are used in small high-tech firms. We define high-tech firms by their R&D intensity. In addition, we define software industry as a special type of R&D-intensive firm. We focus on the methods that are used by the small high-tech firms in evaluating the profitability of investment projects, estimating the cost of capital and making decisions related to the capital structure. Our results based on two surveys of Finnish firms indicate that the high-tech firms use similar capital budgeting methods and estimate their cost of capital in a similar way to other small-sized firms in other industries. Moreover, high-tech firms seek external financing and co-owners.

Citation

Silvola, H. (2006), "Low-Intensity R&D and Capital Budgeting Decisions in it Firms", Epstein, M.J. and Lee, J.Y. (Ed.) Advances in Management Accounting (Advances in Management Accounting, Vol. 15), Emerald Group Publishing Limited, Leeds, pp. 21-49. https://doi.org/10.1016/S1474-7871(06)15002-9