Examples of financing innovative projects

Abstract

This article was written in order to characterize the innovative activity of enterprises in terms of its financing sources. Obtaining sufficient fundsis a basic requirement for undertaking any investment activ- ity and it largely determines the further investment process and related decisions. An analysis of the available sources of financing indicates the interdependence between the innovation’s subject area and the structure of its financing. The functioning of two selected companies dealing with the implementation of innovative products will serve as an illustration of both the theoretical and practical aspects of financing innovative projects. Design and methodology The paper hypothesizes that the financing of modern innovations requires flexible conditions and high level of capital,as verified by literature review and analysis of innovative products and companies. The article consists of three parts. The first defines the concept of innovation and characterizes individual types of innovation: technological, organizational and social. Also discussed are the characteristic features of the phenomenon of innovation, the conditions shaping itand the impact it has on economic growth. The second part is a review of existing sources of capital and methods of raising it through market and public instruments. Also discussed are the conditions for the use of individual instruments, depend- ing on the stage of enterprise development, as well as their potential advantages and limitations from the entrepreneur’s point of view. The third part analyzes innovative products and companies responsible for their creation and devel- opment: the self-driving vehicle created by the American company Tesla Inc. and a thermographic tester for oncological diagnostics created by the Polish company BRASTER. Findings and implications Innovation belongs to the developing field of economy and economics. Statistical and econometric studies prove that, due to the significant risk level, innovation needs to be stimulated. Its development has a positive impact both on GDP growth and living conditions. However, in order to keep up with the technological frontier, it is necessary to under take appropriate actions serving to reduce the technological gap. This is why financing innovation is a complex process, requiring a flexible approach. And there is a considerable variety of financial instruments dedicated to innovations offered by market entities and by state institutions. This theoretical work is illustrated with examples of companies implementing technologically sophisticated products. Tesla Inc. finances work on the self-driving vehicle by increasing operational obligations, issuing debt securities, additional capital contributions and even the sale of CO2 emission rights. On the other hand, BRASTER SA, while working on introducing the oncological tester on the market, accumulated capital as a result of large issues of shares and taking out bank loans, which indicates that the company is just learning investment processes.