RCHE Publications


John Burr Ph.D., Purdue University

Document Type Article


The model continues past this simple relationship of innovaton and he impact on capital structure because of a mechanical relationship that exists between capital structure and slack. The second essay addresses endogeneity between leverage changes and the impact this might have on investment in experimentation. The fundamental question investigated is “does the increasing governance of debt and the decrease in slack fundamentally change the nature of the investment being made in innovation?” With respect to period-to-period change, an increase (decrease) in debt results in a decrease (increase) in slack as the slack is committed to the service of debt. Once debt is increased, the additional payment of interest is a commitment to use free cash flow to the