Family firms, R&D outsourcing competitiveness and debt financing

Purpose This paper aims to explore the role of a specific R&D strategy, that is, R&D outsourcing competitiveness, which consists of the firm’s decision to outperform their respective industry peers in terms of outsourcing R&D investments, as a determinant of capital structure. Moreover, it also considers the contingent role of family firms in the above-mentioned relationship. Design/methodology/approach We conducted several panel data fixed-effects regressions based on a sample of 10,584 firm-year observations of privately held manufacturing firms over a 12-year period (2005–2016). Findings The obtained findings reveal that firms competing on the basis of R&D outsourcing are more prone to debt-based capital structures. Furthermore, being a family firm does not affect the R&D outsourcing competitiveness-indebtedness relationship. However, for firms that consider outsourcing R&D as a strategic priority, i.e. those that actually invest in external R&D, we found that family firms exert a negative moderating effect on the link between R&D outsourcing competitiveness and leverage, revealing the higher family firms’ aversion to finance R&D outsourcing competitiveness with debt. Practical implications A deeper understanding of the relationship between R&D outsourcing competitiveness and firm indebtedness allows external financers and investors to assess firms’ financing strategies more accurately. Moreover, this study uncovers meaningful heterogeneity within family firms: those family firms that consider R&D outsourcing as a strategic priority adopt a different capital structure than those family firms that do not. Advisors and policymakers should tailor financial support and instruments to the strategic profiles of these firms, fostering R&D outsourcing strategies while respecting family-specific constraints. Originality/value The main contribution of this study lies in examining how a dimension of corporate strategy, i.e. R&D outsourcing competitiveness, influences firms’ financial structure and, more specifically, their level of indebtedness in the context of privately held firms.