Abstract: Technological firms invest in R&D looking for innovative solutions but assuming high costs and great (technological) uncertainty regarding final results and returns. Additionally, they face other problems related to R&D management. This empirical study tries to determine which of the factors favour or constrain the decision of these firms to engage in R&D. The analysis uses financial data of 14,619 ICT listed companies of 22 countries from 2003 to 2018. Additionally, macroeconomic data specific for the countries and the sector were used. For the analysis of dynamic panel data, a System-GMM method is used. Among the findings, we highlight that cash flow, contrary to the known theoretical models and empirical evidences, negatively impacts on R&D investment. Debt is neither the right source for R&D funding, as the effect is also negative. This suggests that ICT companies are forced to manage their R&D activities differently, relying more on other funding sources, taking advantage of growth opportunities and benefiting from a favourable macroeconomic environment in terms of growth and increased business sector spending on R&D. These results are similar in both sub-sectors and in all countries, both bank- and market based. The exception is firms with few growth opportunities and little debt.
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