Abstract
This article aims to identify the main business and economic determinants of capital structure in a sample of innovativecompanies from BRICS countries.We achieve this by presenting a comparative analysis of 1,437 high-tech and 1,485 non-innovative companies in thepharmaceuticals, electronics, IT, and telecommunications sectors between 2008 and 2015. We conduct a regressionanalysis using a significant number of variables, such as profitability, size, proportion of tangible assets, and growthpotential. The highlighted parameters are then examined in order to identify the characteristic features displayed in thecapital structure of innovative firms.Our results indicate that the following company characteristics are relevant in determining capital structure: informationasymmetry costs (those which are associated with the unique activities of innovative companies), high growthpotential generated by the availability of network effects, a high innovative applicability, low marginal and transportcosts, and a high proportion of intangible assets. Moreover, we found that there is a distinct difference in the capitalstructure of companies as they vary in levels of innovation. An innovative company’s proportion of intangible assetshas a multidirectional effect on the debt amount. The potential for growth is also a significant factor which has apredominantly negative effect on the level of an innovative company’s financial leverage. Levels of borrowing are overalllower for innovative firms.Our major conclusion, drawing from the results above, is that innovative companies in BRICS countries use relativelylittle debt in the case of high growth potential. This indicates a general need to overcome the information asymmetrychallenge in order to increase the growth rates of individual companies.The scientific novelty of this analysis relates most strongly to the broadness of scope of our investigation, the focuson BRICS countries specifically, and the applicability of its conclusions in wider business and economic contexts. Thebreadth of data from a wide range of companies and sectors (both innovative and non-innovative), and the high numberof companies utilized in the study, lend our evaluation an undeniable credibility within its scope, especially where itupholds similar conclusions in related literature of narrower focus. As a corollary to this, it may be conceivably assertedthat these results are not merely applicable to individual companies, or even sectors of the economy, but due to theirwide field of origin, they can have economy-wide implications on business and financial strategies.
Highlights
The 21st century economy is based on knowledge, and information has become a priority
Our results indicate that the following company characteristics are relevant in determining capital structure: information asymmetry costs, high growth potential generated by the availability of network effects, a high innovative applicability, low marginal and transport costs, and a high proportion of intangible assets
These features include the existence of the information asymmetry costs associated with the specificity and uniqueness of the activities of innovative companies, the presence of high growth potential generated by the existence of network effects, the high applicability of innovation, and the low marginal and transport costs associated with these companies
Summary
The 21st century economy is based on knowledge, and information has become a priority. It is safe to say that currently, knowledge in all its forms plays the most essential role in the process of economic development. Those countries which are capable of creating and effectively applying various kinds of knowledge have great potential for development, and companies that effectively and widely use new knowledge are a step ahead of their competitors. Innovations allow companies to increase their performance and produce new products and services through the application of new technologies, materials and processes. It is difficult to assess the significance of innovations at the macro level without taking into account their role at the micro level of companies, as they play a significant role in influencing the performance of firms
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