Resumen
I hypothesize that highly innovative firms ? those with high risk, yet higher potential return ? will be more likely to raise funds through stock markets than bond markets. Using the product life-cycle as a theoretical framework, this is all placed within the context of the Trade-Off theory of capital structure. Empirically, I test this relationship of innovative activity to equity issuance by regressing patent activity (as a proxy for innovation) on the ratio of funds raised through the stock market to total funds raised. The results are statistically and economically meaningful.