Corporate governance, external R&D and finance decisions of hi-tech firms

Since corporate governance practice and firm structure have experienced dramatic changes due to decreasing transaction costs, more and more firms replaced various kinds of in-house practices with external acquisition. In this paper we mainly discuss about the change of R&D mode in high-tech companies from traditional internal R&D activities within in-house research departments to external R&D activities including market transaction, merger & acquisition (M&A) and strategic alliance among high-tech companies, also we do explore about its implication to finance modes and finance environment for the high-tech companies. We found that external R&D choice mainly decided by innovation risks and information costs for external acquisition. In addition, external R&D has some implications on finance mode and finance environment, which means, financial institution design may be supportive to certain industries' R&D mode selection.