OxTalks will soon move to the new Halo platform and will become 'Oxford Events.' There will be a need for an OxTalks freeze. This was previously planned for Friday 14th November – a new date will be shared as soon as it is available (full details will be available on the Staff Gateway).
In the meantime, the OxTalks site will remain active and events will continue to be published.
If staff have any questions about the Oxford Events launch, please contact halo@digital.ox.ac.uk
We study the role of financial frictions in determining the allocation of investment and innovation. Empirically, we find that established firms are investment-intensive when they have low net worth but become innovation-intensive as they accumulate net worth. To interpret these findings, we develop an endogenous growth model with heterogeneous firms and financial frictions. In our model, firms are investment-intensive when they have low net worth because their returns to capital are high. Financial frictions determine the rate at which firms drive down the returns to capital and shift towards innovation. Quantitatively, the aggregate losses due to lower innovation are large, even though the allocation of capital to existing ideas is comparatively efficient. If innovation has positive spillovers, a planner would lower investment among constrained firms to finance more innovation. An innovation subsidy does not generate the correct distribution of investment and innovation to exactly decentralize this outcome.
