Financing Choices for Technological Upgrading: Evidence from Interviews with Thai Firms

This research investigates the significance of technological innovation for Thailand’s industrial development through equity participation in the form of foreign direct investment (FDI). The pecking order theory suggests that to finance technological upgrading, firms tend to prioritize internal fund...

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Bibliographic Details
Published in:ASEAN economic bulletin 2022-04, Vol.39 (1), p.68-82
Main Authors: Ishido, Hikari, Liang, Licheng, Sakunasingha, Benjalux, Firms, Thai
Format: Article
Language:English
Subjects:
Capital structure
Companies
Debt financing
Economic development
Equity
Equity (Finance)
Equity financing
Equity participations
Externality
Finance
Financing
Foreign companies
Foreign investment
Foreign investments
Host country
Industrial development
Innovations
Intangible assets
Interviews
Japan
Local businesses
Productivity
R&D
Research & development
Technological change
Technology
Technology transfer
Thailand
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Summary:This research investigates the significance of technological innovation for Thailand’s industrial development through equity participation in the form of foreign direct investment (FDI). The pecking order theory suggests that to finance technological upgrading, firms tend to prioritize internal funding, and use debt and equity financing as the last resort. In the context of incessant technological change, however, equity financing might be a better choice. This research highlights some aspects of how that is the case by analysing firm-level performance data from Thailand and then conducting in-depth interviews with top executives from several companies located in the Eastern Economic Corridor (EEC). We find that the conventional pecking order theory does not hold when it comes to external financing decisions. The interview insights reveal that, while a majority of companies prioritize internal financing, capturing technology (as intangible assets) via equity as well as non-equity linkages with foreign firms is also observed. Given that technological upgrading can result from FDI inflows by foreign firms, a truly “joint” nature of equity and non-equity forms of investment projects would serve as a win-win option for Thai and foreign firms, especially under the “Thailand 4.0” policy framework.
ISSN:2339-5095
2339-5206
DOI:10.1355/ae39-1d