Mario Laul

Title: Financing Firm Level Research & Development in the United States’ Solar Photovoltaic Industry: the Case of First Solar, Inc., 2002-2016

Supervisor: Prof. Dr. Jan A. Kregel

Opponent: Aleksandrs Cepilovs, MA

Defense: 9 June 2017


Abstract: The aim of the thesis is to study the financing of research and development (R&D) in the United States’ solar energy firm First Solar, Inc. (FS). The thesis asks the following question: how did FS finance its R&D between 2002 and 2016 (including R&D-related acquisitions), and has R&D spending been sensitive to variations in the availability of internal funds (measured by cash flow and holdings)? Relying on data derived from Form 10-k reports, the thesis finds that before the initial public offering (IPO) in 2006, FS financed its R&D through a mix of cash equity contributions, private loans, public R&D grants, and share-based compensation. In subsequent years, R&D expenditure was financed primarily from internal funds provided by operating activities. With one exception, this also applies to R&D-related acquisitions. Although growth in net income and cash holdings is correlated with increased R&D investment, R&D spending shows no or insignificant sensitivity to negative cash flow shocks. Throughout the post-IPO period, FS has been able to increase and maintain its R&D investment levels by managing a large buffer stock of internal liquidity. These results are in contrast to some earlier studies on the financing of R&D in US manufacturing firms, but in line with more recent research.

Keywords: financing R&D; cash flow sensitivity; cash holdings; value of liquidity; R&D smoothing; First Solar; renewable energy innovation.