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This paper investigates the financial characteristics of new small firms. The analysis develops a representative, small-firm financial profile, and evaluates the extent to which the proportionate use of different instruments and sources is correlated with industry-level and firm-specific characteristics. Multivariate methods are then used to examine relationships between financial structure, R&D-intensity and innovation.Our results suggest that relationships between knowledge-intensity and capital structure are bidirectional. After controlling for a range of industry-and firm-level covariates, firms that devote a higher percentage of their investment expenditure to R&D also exhibit less debt-intensive structures. Conversely, debt-intensive structures also act to constrain investments in R&D. These relationships, however, depend upon the type of debt in the asset mix. It is the share of long-term debt to total assets that is negatively related to investments in knowledge.

This paper explores differences between innovative and non-innovative establishments in business service industries. It focuses on small establishments that supply core technical inputs to other firms: establishments in computer and related services, engineering, and other scientific and technical services.

Considerable attention has been directed at understanding the structural changes that are generating an increased need for skilled workers. These changes are perceived to be the result of developments associated with the emergence of the new knowledge economy, whose potential is often linked to the growth of new technology-based firms (NTBFs). Where are these firms to be found? Related work on changes in technology and innovativeness has been accompanied by the creation of taxonomies that classify industries as high-tech or high-knowledge, based primarily on the characteristics of large firms. There is a temptation to use these taxonomies to identify new technology-based firms only within certain sectors. This paper uses a special survey that collected data on new firms to argue that this would be unwise.

Using a comprehensive micro-database of Canadian firms in conjunction with industry-level data on commodity flows, we develop a profile of corporate diversification within the Canadian economy. Our analysis has two major objectives.First, we decompose corporate diversification into horizontal and vertical components based on the degree to which industries are linked by inter-industry trade flows. Horizontal and vertical decompositions serve as useful proxies for the strategic factors that underlie diversification strategies. We find that over 80% of corporate diversification is horizontal in nature -occurring across industries that do not exhibit strong buyer/seller relationships. In the main, this suggests that many firms pursue diversification strategies in order to spread risk and to take advantage of special assets, more so than as a means of improving vertical efficiencies. Seventy-one percent of corporate diversification is also broad-spectrum -representing an expansion of corporate activities across (as opposed to within) 2-digit industry groups.Our second objective is to ascertain whether diversification patterns are closely associated with certain industry characteristics. Here we consider industry-level factors that are generally posited to affect the level of diversification (e.g., growth, concentration, knowledge-intensity) along with other variables designed to evaluate whether diversified ownership structures are associated with inter-industry commodity flows. Our regression analysis draws on three empirical measures of diversification -first, the amount of total entropy (i.e., diversification) within an industry, second, the average entropy per firm, and last, the percentage of firms within an industry that diversify.Within our sample of 132 commercial industries, total diversification is positively associated with the intensity of inter-industry trade flows. Hence, the more diversified an industry's buyer/seller linkages with other sectors, the greater the level of corporate diversification that one would expect to find. This provides some evidence that inter-industry trade intensity plays a significant role in explaining overall levels of corporate diversification, where this level is, in turn, determined by (i) the number of diversified firms, and (ii) the average level of diversification within these firms. This said, inter-industry trade flows are not related to the average level of diversification, nor do they help explain the percentage of firms within an industry that become diversified. On these issues, we look to other factors for explanation. Industry concentration and average firm size are both positively associated with the amount of diversification per firm. This is consistent with the 'constrained optimization' view of diversification -large firms in concentrated markets look to diversification strategies as a means of achieving growth, as the potential for further expansion in main product areas is often exhausted.Sectoral differences in diversification patterns are apparent. A grea...