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The world is going green. Sustainable technologies, such as renewable energy and electric vehicles, are increasingly becoming part of our daily life. This dissertation fills the ensuing gap by providing an insight into the emerging German greentech industry, one of the largest in the world. It develops an integrated and interdisciplinary theoretical framework in which to assess the relationships between innovation, growth and financing from a firm-level perspective; it then tests this framework empirically. In essence, the study finds that: (1) Innovative activity and corporate growth depend heavily on the availability of capital. At the same time, it appears that particularly innovative firms are more likely to face financial constraints. (2) A lack of funds is very apparent for around a quarter of the firms investigated and seems most severe in the early part of the growth state, where firms focus on commercializing existing products. (3) Government support programs only partially offset these effects​

Inhaltsverzeichnis

Frontmatter

1. Introduction

The world is going green. Sustainability is increasingly becoming a part of our daily üfe. This revolutionary process is being accompanied by a “tectonic shift taking place in the business world as a result of the megatrends of population growth, globalization, urbanization and climate change.” (Oltmanns (2011)) Recent disasters, such as the explosion of the nuclear power plant in Fukushima and the Deepwater Horizon oil spill in the Gulf of Mexico, have fostered this process by changing our perception of the customs and standard practices that allowed them to occur. Although the need for change is typically associated with higher economic cost, it actually harbors tremendous economic potential and infinite opportunities for innovative firms to engage in developing and marketing green technologies. These technologies will increase efficiency, substitute fossil resources and enhance the world’s ability to recover from negative externalities such as CO2 emissions. Clean energy is a hallmark of the emerging discipline that is increasingly being recognized as an industry in its own right and is often referred to as green technology or “greentech”. However, one major concern of policymakers is that barriers imposed by today’s economic system hinder its progress and ultimately block a more sustainable technology trajectory. This is because externalities are often not priced in – and hence not appropriately integrated in – the institutional system we currently know. With Germany leading the way, many countries have therefore devoted considerable financial resources to supporting innovation in and the diffusion of green technologies, hoping to set sustainable development in motion while at the same time sparking industry and fueling job creation. It is therefore crucial to understand the issues of technological innovation, firm growth and its financing, and how the two are interrelated. Interdisciplinary research combining these elements is scarce, however; and greentech evidence at firm level is literally non-existent. This book therefore addresses the existing research gaps by not only developing an integrated framework, but also providing one of the first empirical and firm-level studies in this field, centering around the German greentech industry, which has become one of the largest in the world.
Philipp H. Hoff

2. Review of existing Knowledge about greentech

In the statement quoted above, O’Rourke reminds us that greentech (see below for a comparative definition of “greentech” and “cleantech”) has reached a point in its evolution at which future development will be shaped, and at which the industry’s fate hinges on decisions taken by stakeholders and investors in particular. Researchers are laying the foundation for these decisions by providing knowledge about greentech from various perspectives. At the same time, however, greentech remains a young, multidisciplinary and interdisciplinary field of research in which many practical and highly relevant issues have yet to be touched by academic researchers (Russo (2003)).
Philipp H. Hoff

3. Review of other relevant literature

This chapter lays the foundation for the theoretical framework by reviewing literature in the relevant areas, i.e. innovation, growth and financial economics. It is organized as follows: First, it evaluates theoretical models of technology innovation and diffusion and presents related empirical evidence on various industries. Second, it reviews implications for firms and analyzes existing empirical evidence. Third, it summarizes the findings throughout corporate lifecycles as a basis for integrating innovation, corporate finance and policy research. This section also reviews the main determinants of firm growth. Fourth, it discusses finance theory and the corresponding empirical findings, focusing on capital structures and financial constraints. Finally, it analyzes greentech programs launched by the German government and draws implications at the level of the firm.
Philipp H. Hoff

4. Theoretical Framework

The previous chapters lay the foundation for the theoretical framework that is the subject of this chapter. The aim of this framework is to integrate the findings synthesized from literature on innovation, growth and finance into a single, comprehensive framework. The chapter is organized as follows: First, it provides an interdisciplinary summary of the most important conclusions from previous chapters. Second, it discusses problems relating to the integration of these three distinct fields of research. Third, it develops the theoretical framework and derives research hypotheses. The chapter ends with a brief conclusion.
Philipp H. Hoff

5. Empirical analysis

The empirical strategy aims to test implications derived from the theoretical framework in order to assess the impact of financing on innovation and growth in the greentech sector. The empirical analysis is composed of two main parts. The first part analyzes the main characteristics of firm cohorts in each state of development, i.e. start-up, early growth, expansion and maturity with. This part focuses especially on innovation, growth and financing at firm level. The methodology is primarily based on non-parametric testing methods for independent samples and descriptive analysis. The second part seeks to translate the theoretical framework into a testable empirical model. Essentially, capital endowment is regressed toward innovation, growth and financial constraints while taking into account relevant control factors derived from literature. Analysis uses two logit models and one OLS model to test the research hypotheses. The overall chapter is structured as follows: First, it outlines the sampling approach and the underlying database. Second, it shows how the data was validated. Third, it defines all relevant variables and describes how they are measured. Fourth, it presents the methodology for and results of the comparative analysis. Finally, it provides an overview of the empirical models, presents the findings, assesses validity and reliability, and ends with a brief conclusion. The combined assessment, discussion of findings and implications for theory and practice are the subject of the chapter 6.
Philipp H. Hoff

6. Final discussion and implications

The theoretical framework proposed the greentech financial innovation growth cycle as a way to integrate three distinct bodies of literature, in addition to political considerations. The framework was shown to clearly present the collected data. However, comparative analysis reveals a number of lessons to be learned. First, capital provided by friends and family seems to play a more important role than was originally anticipated. Second, inside finance remains the most important financing means throughout all phases, not only in the early days when a firm is becoming established. Third, the distinctions drawn between types of innovation did not yield sufficient insights. It does, however, appear that overall (incremental and non- incremental) innovation output increases up to the expansion state and diminishes thereafter. Fourth, firms in the early growth state and start-up firms experience the strongest firm growth. And lastly, government funds not only support early-state firms, but are also extensively used by expanding and even mature firms.
Philipp H. Hoff

7. Executive summary

Philipp H. Hoff

Backmatter

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