The effect of ownership structure on the relationship between R&D intensity and cash flow

Economists stress issues for financing Research & Development (R&D) in business sectors. Credit constraints are considered the main barriers for the implementation of R&D projects within firms. Usually, incentives are aimed at boosting R&D expenditures, but are constrained by financial resources and lack of warranties for the risk. In this paper, we examine how cash holdings can affect the R&D expenses of a firm. An important factor that may influence the R&D expenditures, together with cash flow, is the ownership structure. The use of multiple moderate regressions are proposed for analysing the relationship between financial ratios and R&D intensity. The analysis is performed using a data base concerning the financial reports of Italian firms with reference to the years 2006 and 2007.