Small Business Economics

, Volume 42, Issue 2, pp 207–220 | Cite as

R&D investment of start-up firms: does founders’ human capital matter?

  • Yuji HonjoEmail author
  • Masatoshi Kato
  • Hiroyuki Okamuro


This article examines whether founders’ human capital affects not only actual investment but also required investment in research and development (R&D), using the original data of Japanese start-up firms. The estimation results indicate that higher levels of founders’ human capital, especially their education levels, increase both actual and required investment in R&D and thus do not necessarily contribute to reducing the funding gap for R&D.


Founder Funding gap Human capital R&D Start-up 

JEL Classifications

G30 M13 O32 L26 



This study is supported by a Grant-in-Aid for Scientific Research (A) (no. 20243018) from the Japan Society for the Promotion of Science. We are grateful to Luca Grilli, Itxaso del Palacio, and the participants in a seminar at Politecnico di Milano, the 9th Interdisciplinary European Conference on Entrepreneurship Research (IECER), and the VICO Final Conference for their helpful comments and suggestions. We thank the editor and two anonymous reviewers for their valuable comments and suggestions. We also thank Kosei Fukuda for valuable advice on estimation methods and Kenta Ikeuchi for excellent research assistance. Needless to say, any remaining errors are our own.


  1. Aghion, P., Klemm, A., Bond, S., & Marinescu, I. (2004). Technology and financial structure: Are innovative firms different? Journal of the European Economic Association, 2, 277–288.CrossRefGoogle Scholar
  2. Åstebro, T., & Bernhardt, I. (2003). Start-up financing, owner characteristics, and survival. Journal of Economics and Business, 55, 303–319.CrossRefGoogle Scholar
  3. Åstebro, T., & Bernhardt, I. (2005). The winner’s curse of human capital. Small Business Economics, 24, 63–78.CrossRefGoogle Scholar
  4. Avery, R. B., Bostic, R. W., & Samolyk, K. A. (1998). The role of personal wealth in small business finance. Journal of Banking and Finance, 22, 1019–1061.CrossRefGoogle Scholar
  5. Bates, T. (1990). Entrepreneur human capital inputs and small business longevity. Review of Economics and Statistics, 72, 551–559.CrossRefGoogle Scholar
  6. Berger, A. N., & Udell, G. F. (1998). The economics of small business finance: The roles of private equity and debt markets in the financial growth. Journal of Banking and Finance, 22, 613–673.CrossRefGoogle Scholar
  7. Brown, J. R., Fazzari, S. M., & Petersen, B. C. (2009). Financing innovation and growth: Cash flow, external equity, and the 1990s R&D boom. Journal of Finance, 64, 151–185.CrossRefGoogle Scholar
  8. Carpenter, R. E., & Petersen, B. C. (2002). Capital market imperfections, high-tech investment, and new equity financing. Economic Journal, 112, F54–F72.CrossRefGoogle Scholar
  9. Cassar, G. (2004). The financing of business start-ups. Journal of Business Venturing, 19, 261–283.CrossRefGoogle Scholar
  10. Colombo, M. G., & Grilli, L. (2005). Founders’ human capital and the growth of new technology-based firms: A competence-based view. Research Policy, 34, 795–816.CrossRefGoogle Scholar
  11. Colombo, M. G., & Grilli, L. (2007). Funding gaps? Access to bank loans by high-tech start-ups. Small Business Economics, 29, 25–46.CrossRefGoogle Scholar
  12. Cressy, R. (1996). Are business start-ups debt-rationed? Economic Journal, 106, 1253–1270.CrossRefGoogle Scholar
  13. Czarnitzki, D., & Hottenrott, A. H. (2011). R&D investment and financing constraints of small and medium-sized firms. Small Business Economics, 36, 65–83.CrossRefGoogle Scholar
  14. Del Canto, J. G., & González, I. S. (1999). A resource-based analysis of the factors determining a firm’s R&D activities. Research Policy, 28, 891–905.CrossRefGoogle Scholar
  15. Denis, D. J. (2004). Entrepreneurial finance: An overview of the issues and evidence. Journal of Corporate Finance, 10, 301–326.CrossRefGoogle Scholar
  16. Fazzari, S. M., Hubbard, R. G., & Petersen, B. C. (1988). Financing constraints and corporate investment. Brooking Papers on Economic Activity, 2, 141–206.CrossRefGoogle Scholar
  17. Freel, M. (2007). Are small innovators credit rationed? Small Business Economics, 28, 23–35.CrossRefGoogle Scholar
  18. Guiso, L. (1998). High-tech firms and credit rationing. Journal of Economic Behavior and Organization, 35, 39–59.CrossRefGoogle Scholar
  19. Hall, B. H. (2002). The financing of research and development. Oxford Review of Economic Policy, 18, 35–51.CrossRefGoogle Scholar
  20. Himmelberg, C., & Petersen, B. (1994). R&D and internal finance: A panel study of small firms in high-tech industries. Review of Economics and Statistics, 76, 38–51.CrossRefGoogle Scholar
  21. Honjo, Y. (2001). Do innovative start-ups really wish to go public? Evidence from Japanese electrical manufacturing companies. Applied Economics Letters, 8, 493–497.CrossRefGoogle Scholar
  22. Kamien, M. I., & Schwartz, N. L. (1978). Self-financing of an R&D project. American Economic Review, 68, 252–261.Google Scholar
  23. Leland, H., & Pyle, D. (1977). Informational asymmetries, financial structure, and financial intermediation. Journal of Finance, 32, 371–387.CrossRefGoogle Scholar
  24. Müller, E., & Zimmermann, V. (2009). The importance of equity finance for R&D activity. Small Business Economics, 33, 303–318.CrossRefGoogle Scholar
  25. Myers, S., & Majluf, N. (1984). Corporate financing and investment decisions when firms have information that investors do not. Journal of Financial Economics, 13, 187–221.CrossRefGoogle Scholar
  26. Okamuro, H. (2009). Determinants of R&D activities by start-up firms: Evidence from Japan. In J. E. Michaels & L. F. Piraro (Eds.), Small business: Innovation, problems and strategy (pp. 27–44). New York: Nova Science Publishers.Google Scholar
  27. Okamuro, H., Kato, M., & Honjo, Y. (2011). Determinants of R&D cooperation in Japanese start-ups. Research Policy, 40, 728–738.CrossRefGoogle Scholar
  28. Parker, S. C., & van Praag, C. M. (2006). Schooling, capital constraints, and entrepreneurial performance: The endogenous triangle. Journal of Business and Economic Statistics, 24, 416–431.CrossRefGoogle Scholar
  29. Revest, V., & Sapio, A. (2012). Financing technology-based small firms in Europe: What do we know? Small Business Economics, 39, 179–205.CrossRefGoogle Scholar
  30. Stiglitz, J. E., & Weiss, A. (1981). Credit rationing in markets with imperfect capital markets. American Economic Review, 71, 393–410.Google Scholar
  31. Van der Sluis, J., van Praag, M., & Vijverberg, W. (2008). Education and entrepreneurship selection and performance: A review of the empirical literature. Journal of Economic Surveys, 22, 795–841.CrossRefGoogle Scholar

Copyright information

© Springer Science+Business Media New York 2013

Authors and Affiliations

  1. 1.Faculty of CommerceChuo UniversityTokyoJapan
  2. 2.School of EconomicsKwansei Gakuin UniversityHyogoJapan
  3. 3.Graduate School of EconomicsHitotsubashi UniversityTokyoJapan

Personalised recommendations