The capital structure implications on innovation


In one paper, a researcher argues that consideration of firm strategy can help illuminate the choices managers make between debt and equity financing. Within an industry, the form of competition that each firm chooses will determine the strategic value to the firm of maintaining financial slack. The empirical analysis yields strong support for the proposition that financial slack should be a particularly critical strategic imperative for firms pursuing a competitive strategy premised on innovation. The researcher also demonstrates that firms pursuing such a strategy that fail to recognize the value of financial slack are likely to perform poorly.



O’Brien, J. P., 2003. The capital structure implications of pursuing a strategy of innovation. Strategic Management Journal 24 (5), 415–431.

Available at:

Mer från InventiveBoard

Performance measures and management control in new product development

Approximate reading time: 2-3 min. An explorative study was conducted to investigate financial management with focus on performance measurements in product development. The study focused on three aspects of management control which managers for product development consider to be important. These aspects were: 1. Product development’s…

Läs mer

Sharing economy as innovation

Approximate reading time: 15-20 min (including videos). In this blog post we will explain how sharing economy can be regarded as an innovation and how it can affect your organization. Sharing economy involves various arrangements for renting, sharing or borrowing things instead of owning them….

Läs mer