Family firms, R&D outsourcing competitiveness and debt financing

Corporate capital structure has traditionally attracted substantial attention in business and management. Among the multiple and heterogeneous drivers that have been identified as determinants of capital structure (Hang et al., 2018; Shil et al., 2019), the incidence of the firm’s research and development (R&D) strategy requires further elaboration (Bartolini, 2013; Faria et al., 2024; Romero-Álvarez et al., 2025). This lack of in-depth research is surprising, as investment and financing decisions are interactive processes (Jensen and Meckling, 1976). Previous literature addressing such decisions has focused on the influence of capital structure on innovation (e.g. Cuevas-Vargas and Cortés-Palacios, 2025), overlooking that the opposite may be the case (see Bartoloni, 2013). That is, firms could configure their capital structure according to the R&D strategy they wish to pursue (e.g. O’Brien, 2003). Based on this assumption, “the door has been opened for researchers to explore how the choice of investments, such as R&D investment, can influence a firm’s capital structure” (Chen et al., 2010, p. 321).

Accordingly, different authors have dealt with the influence of R&D investment on capital structure, reaching heterogeneous results. For example, prior studies have typically argued that firms that invest intensively in R&D exhibit low levels of indebtedness (Singh and Faircloth, 2005), mainly due to asymmetric information between lenders and firms (Alexeeva-Alexeev and Mazas-Perez-Oleaga, 2024; Bah and Dumontier, 2001; Rajaiya, 2023). However, others have shown that although innovative firms tend to rely more on internal resources, as the innovation effort grows, the use of debt is crucial, finding a positive relationship between R&D investment and leverage (Bartoloni, 2013; Faria et al., 2024).

Given the above-mentioned inconsistencies in the relationship between R&D and debt, we go a step further and focus on a specific R&D strategy, that is, R&D outsourcing competitiveness (Faria et al., 2024; Howells and Gagliardi, 2008; Van de Vrande et al., 2009). This strategy consists of the firm’s decision to outperform its respective industry peers in terms of external R&D investments (O’Brien, 2003; Hovakimian et al., 2001). Investing in external R&D is not the same as adopting the strategic decision to place the firm ahead of its industry peers in terms of R&D (O’Brien, 2003), and the purpose underlying each approach might require different financing needs. In this regard, over the last decade, there has been a revolution in the externalisation of innovation activities, shifting from outsourcing repetitive tasks, such as logistics, to more specialised ones, namely R&D outsourcing (Dai and Shin, 2019; Martínez-Alonso et al., 2024) ^[1]. This trend shapes how firms compete (from in-house R&D to R&D outsourcing), which requires an adequate capital structure to support their strategy on an ongoing basis.

In this sense, following the agency theory (Jensen and Meckling, 1976) and the pecking order perspective (Myers and Majluf, 1984), it can be argued that, unlike firms that compete on the basis of in-house R&D, those that choose to do so externally may experience lower information asymmetry concerns and, thus, upgraded borrowing power (D’Alfonso and Giannangeli, 2012; Djabang et al., 2025). Moreover, firms developing R&D outsourcing competitiveness strategies might achieve greater benefits from long-term relationships between lenders and borrowers because of the nature of the R&D outsourcing strategy itself (e.g. low degree of specificity and low level of opacity) (D’Alfonso and Giannangeli, 2012; Vicente-Lorente, 2001). That is, competing via outsourcing R&D might lead to a win-win relationship between firms (e.g. benefiting from past experiences as a result of close lenders’ monitoring or faster access to long-term and lower-cost financing to support its R&D outsourcing competitiveness) and creditors (e.g. greater confidence to have their loans adequately met) (Tirole, 2006; Tong and Xu, 2003; Bougheas, 2004; Mugo, 2018). Despite this, virtually no research empirically analyses whether firms that emphasise outsourcing R&D strategies over their industry peers are more inclined to debt-based capital structures.

Notwithstanding the potential benefits arising from the relationship between firms competing on the basis of outsourcing R&D and lenders, family firms, due to socioemotional wealth (hereafter, SEW) concerns (Gómez-Mejía et al., 2007, 2010), might approach the strategic decision of funding R&D outsourcing competitiveness differently from non-family firms (Garcés-Galdeano and García-Olaverri, 2020; Gavana et al., 2024; Wiseman and Gomez-Mejía, 1998). The importance of control considerations, the concerns about prolonged financial commitment and long-term stability, as well as intergenerational sustainability (Ginesti et al., 2023; Muñoz-Bullón et al., 2024; Molly et al., 2010), have been considered as drivers of the financing of family firms’ strategic decisions (Córdoba et al., 2024; Díaz-Díaz et al., 2023; Jansen et al., 2023). Thus, examining whether, and to what extent, the relationship between R&D outsourcing competitiveness and leverage may differ between family and non-family firms can help add empirical depth to the ongoing debate on innovation, capital structure and governance (Harasheh et al., 2024).

Based on the inconsistencies identified in the literature analysing R&D investments and firm indebtedness, complemented by the likely differences between family and non-family firms, our research goal is twofold. On the one hand, drawing on specific demand- (firms) and supply-side (lenders) arguments, we analyse if the greater the firm’s emphasis on R&D outsourcing competitiveness, the greater its indebtedness. On the other hand, as family firms may be reluctant to relinquish family control and influence and be inclined to preserve the family legacy and reputation, preserving their socioemotional wealth, we further explore to what extent being a family firm may condition the relationship between R&D outsourcing competitiveness and leverage. For this purpose, we analysed a random sample of Spanish privately held manufacturing firms from the Survey on Business Strategies (ESEE) over 12 years (2005–2016).

Our findings suggest that firms competing on the basis of R&D outsourcing are more inclined to debt-based capital structures. Moreover, the fact of being a family firm has not been found to be a contingent factor on the R&D outsourcing competitiveness-indebtedness relationship. However, when considering actively innovating firms, i.e. those that actually invest in external R&D -leaving out those that do not devote a single euro-, we found that family firms exert a negative moderating effect in the link between R&D outsourcing competitiveness and leverage. That is, when family firms consider outsourcing R&D as a strategic priority, they are characterised as being more averse than their non-family counterparts to finance R&D outsourcing competitiveness with debt.

This article provides several contributions. On the one hand, we extend the existing empirical evidence on innovation and capital structure by analysing how an important dimension of a firm’s corporate strategy – R&D outsourcing competitiveness – can configure its corporate capital structure and more specifically, its level of indebtedness. Moreover, our focus on R&D outsourcing competitiveness adds valuable nuances to the widely held belief that R&D intensity is associated with lower debt levels. Distinguishing between in-house and external R&D competitiveness is fundamental to understanding the heterogeneous findings of previous empirical evidence and advancing our knowledge regarding both research streams. Another contribution comes from considering that the strategic importance of R&D outsourcing does not reside in the firm’s absolute intensity of external R&D but rather in its relative R&D intensity compared to its industry peers, that is, R&D outsourcing competitiveness, enhancing the understanding of intra-industry strategic changes in capital structure. Finally, unlike most studies that analyse capital structure in public firms, our research focuses on private family and non-family firms. By examining the family firm contingent effect, we not only add fine-grained empirical evidence of the heterogeneity that may exist at the firm level in terms of R&D outsourcing competitiveness and indebtedness but also help to understand the family firm behaviour.

This paper proceeds as follows. Section 2 shows the theoretical framework and the hypotheses development. Section 3 describes the panel data and the analytical method employed. Section 4 reveals our main results. Finally, Section 5 discusses and concludes.

Previous research has confirmed that R&D funding is very peculiar because it is characterised by a high level of risk, opportunistic behaviour, moral hazards and adverse selection (Alexeeva-Alexeev and Mazas-Perez-Oleaga, 2024; Hall et al., 2016). In this sense, and in accordance with agency theory, firms pursuing R&D strategies may find greater use of debt inappropriate, mainly because: first, it may be more expensive for R&D than for other investments -due to the augmented uncertainty and asymmetric information- (Rajaiya, 2023; Tirelli and Spinesi, 2021); second, creditors may impose greater control and require protective covenants to protect themselves from risk-shifting (Jiraporn et al., 2013), along with restricting executives’ freedom to make decisions in their firms (Alexeeva-Alexeev and Mazas-Perez-Oleaga, 2024). However, all R&D do not involve exact costs and the same degrees of risk-bearing for firms (Hall et al., 2016), and thus, the capital structure may be partially determined by “make or buy” decisions (Vicente-Lorente, 2001). In fact, literature has warned that the distinct sorts of R&D strategies should be differentiated, as total R&D may not precisely show its implications for capital structure (Piga and Atzeni, 2007).

Accordingly, the relationship between the strategy of R&D outsourcing and leverage may be somewhat different. Specifically, we argue that those firms that engage in more intensive R&D outsourcing strategies relative to their industry peers - R&D outsourcing competitiveness - will likely opt for higher debt because, among other reasons, debt will reduce agency costs (Comino-Jurado et al., 2021a; Duréndez et al., 2019). In this regard, creditors will help firms to ensure the continuity of R&D outsourcing strategies by lessening risks and guaranteeing the availability of financial slack even during bad times. In the same vein, R&D outsourcing is probable to involve generic, not firm-specific or opaque knowledge, which reduces potential knowledge leakage or enhances firms’ reputation, lowering the cost of debt, as uncertainty and asymmetric information are diminished (Rajaiya, 2023) and consequently, the collateral problem is minimised, which positions debt as a good choice (Faria et al., 2024).

This study also draws on the pecking order theory to explain the theoretical rationale behind why firms that outsource R&D are more likely to adopt debt-based financing needs (Myers and Majluf, 1984). According to this perspective, firms first turn to internally generated resources to fund projects instead of using external financing, to slash information asymmetries and avoid the problem of adverse selection (Djabang et al., 2025; Hall et al., 2016). If more than self-financing is required, firms will opt for debt, which is less costly than equity (Block et al., 2024; Tanin et al., 2024). Considering the financing sequence proposed by the pecking order theory and under the assumption that self-financing is not always enough, it may be expected that firms competing in R&D strategies would choose more debt in their capital structure. However, the former influence remains unclear (Mugo, 2018). Some studies found that leverage diminishes with R&D intensity (Djabang et al., 2025; Jordan et al., 1998; Vicente-Lorente, 2001) due to R&D cannot be used to secure loans and because of information asymmetry between borrowers and lenders (Alexeeva-Alexeev and Mazas-Perez-Oleaga, 2024; Czarnitzki and Kraft, 2009; Müller and Zimmermann, 2009). Nevertheless, other investigations have shown a favourable and significant effect of R&D strategies on leverage (Faria et al., 2024; Harasheh et al., 2024), indicating that debt financing, being less costly, is demanded when internal resources are insufficient to fund large innovative projects (Bartoloni, 2013; Giudici and Peleari, 2000).

Nonetheless, beyond total R&D, the interaction between the specific strategy of R&D outsourcing and leverage may have particular connotations, which are also justified by the pecking order theory. Hence, and according to the below reasoning, Myers and Majluf’s pecking order mechanism may prevail when explaining the relationship between R&D outsourcing competitiveness and leverage. Following this vein for this particular R&D strategy, information asymmetry concerns – between the lender and the firm – are lower and the borrowing power is upgraded (D’Alfonso and Giannangeli, 2012), reconciling the assumptions of this theoretical perspective and connecting them with the agency theory.

Inspired by the aforementioned theoretical frameworks – agency theory and pecking order perspective – , hereafter, we build on the demand- and supply-side arguments to propose that those firms that engage in R&D outsourcing competitiveness will opt for indebtedness as an attractive option to finance their R&D investments (David et al., 2008; Faria et al., 2024; O’Brien, 2003).

From a demand-side perspective, first, obtaining debt usually allows access to resources faster and at a lower cost than equity (see, e.g. DLA Piper’s (2024) report), because it has less exposure to adverse selection problems. This nuance is critical if a firm intends to outperform its industry peers in terms of R&D outsourcing, as the faster its access to financial resources, the quicker its investments in R&D outsourcing, accelerating product or service market entry (in other words, reducing time-to-market). This agile access to financial resources thus stimulates firms to engage in R&D outsourcing competitiveness via leverage. Moreover, this stimulus goes beyond the speed of access to suitable financial resources and represents an option to cope with future contingencies. In this sense, creditors may contribute to protecting the prolongation of R&D outsourcing competitiveness by responding to unexpected firm financial distress with tolerance and helping them to overcome liquidity difficulties, reducing uncertainty (Bougheas, 2004; Elsas and Krahnen, 1998), which constitutes an attractive option to select debt for those firms that intend to emphasise a competitiveness strategy based on R&D outsourcing.

Second, lenders monitor R&D outsourcing programmes before issuing financing and supervise them closely, providing two crucial advantages for firms’ reliance on debt. On the one hand, concerns about information asymmetry diminish. Competing via R&D outsourcing may require generic, non-firm-specific knowledge, and the project’s final aims and monitoring steps are pretty straightforward for financiers (D’Alfonso and Giannangeli, 2012). This non-firm specificity of R&D outsourcing may reduce the cost of debt. At the same time, its lack of opacity increases the firm’s borrowing capacity (Vicente-Lorente, 2001), eliminating lenders’ concerns about insufficient collateral (Mugo, 2018). Indeed, this closer lender supervision may also explain why the unavailability of collateral does not impede access to the financial system (Bougheas, 2004). Therefore, firms that seek to compete on the basis of R&D outsourcing in relation to industry peers may consider leverage as a cost-effective and feasible financing choice. On the other hand, hazards inherent to R&D outsourcing competitiveness are alleviated. R&D outsourcing competitiveness offers creditors clear advantages in terms of evaluation and monitoring (Tirole, 2006). Lenders can ensure the ex ante screening of R&D outsourcing strategies (Tong and Xu, 2003) by supervising their customers and developing plans. These creditors’ actions may help firms diminish some risks inherent in competing via R&D outsourcing. Likewise, by taking advantage of creditor monitoring, firms can approach R&D outsourcing competitiveness with more expertise and perspective, as such mitigating the possibility of competing by outsourcing a core competency (Economist Intelligence Unit, 2007). The abovementioned tight creditor monitoring may also help to decide what part of the modular structure of R&D lends itself to outsourcing (Fuller, 2018). Hence, firms may be strategically attracted to outperform other firms in their industry by outsourcing R&D using debt.

Third, competing via R&D outsourcing by resorting to debt enables building relationships that alleviate the potential leakage of knowledge to competitors (Fuller, 2018) and helps the reduction of the focal firm’s control over technology development (Kotlar et al., 2013), which further incentivises firms to use debt for this strategic purpose. Leakage or spillovers of knowledge are an ongoing concern for R&D outsourcing. As a relevant example, funds from governments (e.g. capital government grants) to finance R&D outsourcing competitiveness undoubtedly would require the disclosure of sensitive information to ensure transparency, prevent corruption and promote fair competition (Martínez-Laguna et al., 2021). Yet, lenders do not demand public exposure, reducing the possibility of competitors’ appropriation of R&D knowledge. Creditors are particularly committed to firms, being especially cautious with displaying information that might imply technology leakage, diminishing firms’ risks and concerns.

Fourth, firms seeking to outperform their peers in R&D outsourcing may also choose debt because of the external image (O’Brien, 2003). Lenders’ engagement and agreement, by overcoming adverse selection problems, may convince scientists regarding the expected favourable influence of R&D outsourcing competitiveness on a firm’s reputation and performance (Lichtenthaler and Ernst, 2006). Consequently, the technical staff may consider higher creditor involvement as a guarantee that the R&D outsourcing strategy is perfectly aligned with the firm’s future success, lessening the possible “non-invented here” syndrome. Furthermore, the uncertainty of partner relationships can be resolved by learning from previous lenders’ experience how to choose partners, manage contracts and supervise R&D outsourcing strategies (Hsuan and Mahnke, 2011; Van De Vrande et al., 2006), which, in turn, can diminish moral hazard issues and incertitude. Hence, these strategic issues can attract firms to finance R&D outsourcing competitiveness with debt.

While the demand-side arguments are prominent, if lenders do not see incentives for their part, the relationship between R&D outsourcing competitiveness and debt financing would not be possible. In this sense, some supply-side arguments may encourage creditors to provide funding for those firms emphasising an R&D outsourcing competitiveness strategy.

On the one hand, lenders are aware that the obligations of paying money back to creditors may discipline managers (Jensen, 1989), avoiding devoting available slack to unproductive technology exploration and allocating funds to suitable R&D outsourcing strategies capable of better exploiting current capabilities. That is, by financing R&D outsourcing competitiveness with debt, managers are more motivated to act efficiently because the default on debt obligations may involve high personal costs, such as termination of employment and shifting firm control towards creditors (Choi et al., 2016). This higher efficiency decreases the possibility of risk-shifting and incentivises lenders to fund firms that seek to outperform their industry peers in terms of R&D outsourcing.

On the other hand, R&D outsourcing competitiveness provides some benefits, such as overcoming internal knowledge shortages and the scarcity of internal resources and capabilities (Veugelers and Cassiman, 1999), augmenting knowledge accumulation (Lichtenthaler and Ernst, 2006) and the speed of integrating up-to-date technologies (Kang et al., 2015). Consequently, R&D outsourcing competitiveness usually contributes to decreasing the risk of failure of R&D initiatives compared to those R&D activities carried out internally, which may make lenders more inclined and confident to finance firms that compete based on R&D outsourcing and require lower borrowing costs. Likewise, the productivity gains in internal capabilities or the access to new markets and knowledge that outsourcing part of the innovation process may allow (Tojeiro-Rivero and Moreno, 2019; OECD, 2008), make creditors have better expectations concerning having their loans adequately met, supporting firms’ decision to use debt to finance their R&D outsourcing competitiveness.

Therefore, debt financing could be a preference for firms that consider R&D outsourcing a strategic priority compared to other firms competing in the same industry. We ground this proposal based on demand- and supply-side theoretical arguments and establish that:

A growing body of research supports the idea that the type of ownership, whether family or non-family, explains important differences in the way strategic decisions are made (Garcés-Galdeano and García-Olaverri, 2020; Gavana et al., 2024; Steeger and Hoffmann, 2016). In family firms, defined as businesses “dominantly controlled by a family with the vision to potentially sustain family control across generations” (Zellweger, 2017, p. 22), ownership and management are often concentrated in family hands (Chrisman and Patel, 2012; Debicki et al., 2016; Schulze and Bövers, 2022), allowing family owner-managers to exercise significant power and influence over business activities and choices (Martínez-Alonso et al., 2024; Martínez-Romero et al., 2023). Nevertheless, what truly distinguishes family firms is the dual goal of achieving financial performance while safeguarding emotional considerations such as family values, reputation and intergenerational continuity (Berrone et al., 2012; Gómez-Mejía et al., 2025; Naldi et al., 2024). This balance between financial and family goals deeply conditions their strategic choices (Chirico and Kellermanns, 2024; Chrisman and Patel, 2012; Díaz-Moriana et al., 2024), including those related to innovation financing decisions (Cirillo et al., 2019), leading to behaviours and outcomes that differ from those observed in non-family firms (Blanco-Mazagatos et al., 2024; Córdoba et al., 2024; Michiels and Molly, 2017). For example, some scholars suggest that family firms are reluctant to borrow due to concerns about financial distress and reputation protection (e.g. Bopaiah, 1998; Santos et al., 2014; Schmid, 2013). Other authors argue that debt can be a strategic choice that allows families to maintain control without diluting ownership (e.g. Croci et al., 2011; Keasey et al., 2015; López-Delgado and Diéguez-Soto, 2020). Moreover, creditor participation may impose stricter monitoring and limit the family’s discretion and autonomy to allocate resources for its own benefit (e.g. Shyu and Lee, 2009). These contrasting perspectives highlight the complex nature of borrowing decisions in family firms (Blanco-Mazagatos et al., 2024; Jansen et al., 2023; Michiels and Molly, 2017). Understanding how family firms shape debt financing behaviour in an innovative context is crucial, especially given today’s volatile and competitive environment. This study examines how the idiosyncratic nature of family firms moderates the relationship between R&D outsourcing competitiveness and debt financing, thereby advancing our theoretical understanding of family firm behaviour and providing insights into their strategic contributions to innovation and debt financing structures.

The behavioural agency model suggests that family firms exhibit different decision-making behaviour than non-family firms (Gómez-Mejía et al., 2021; Wiseman and Gómez-Mejía, 1998), primarily due to the loss aversion of family owners, who are more sensitive to potential losses than to gains (Gómez-Mejía et al., 2007; Naldi et al., 2024; Sciascia et al., 2015). This loss aversion may be particularly pronounced in the context of R&D outsourcing competitiveness, where the need to preserve SEW may make family firms reluctant to finance risky investments through debt (Ginesti et al., 2023; Sun et al., 2018; Tsao et al., 2019). SEW, which encompasses all “non-financial aspects of the firm that meet the family’s affective needs” (Gómez-Mejía et al., 2007, p. 106), such as family identity, emotional attachment and the perpetuation of the family dynasty (Berrone et al., 2012; Martínez-Romero and Rojo-Ramírez, 2016; Naldi et al., 2024), plays a central role in shaping the strategic decision-making behaviour of family firms (Cambrea et al., 2022; Ginesti et al., 2023; Martínez-Romero et al., 2023). In the case of financing R&D outsourcing competitiveness, family firms may be less inclined to take on higher levels of debt as this could threaten their SEW by introducing potential risks such as financial strain or family conflict (Blanco-Mazagatos et al., 2024; Cruz et al., 2012; Prencipe et al., 2008; Zellweger, 2017).

Maintaining control remains a primary objective for most family firms (Berrone et al., 2012; Camisón et al., 2022; Martínez-Romero and Rojo-Ramírez, 2017), which adds a layer of complexity to the relationship between R&D outsourcing competitiveness and debt financing (Chrisman and Patel, 2012; Tsao et al., 2019). In line with the predictions of pecking order theory (Blanco-Mazagatos et al., 2024; Serrasqueiro et al., 2020), family firms first opt for self-generated internal resources (Jansen et al., 2023; Pindado et al., 2015), avoiding taking on higher levels of debt, even when they strategically choose to compete in R&D outsourcing. This aversion is driven mainly by concerns that debt financing may undermine family control by introducing external stakeholders, such as creditors, who may influence key decisions related to R&D outsourcing (Ginesti et al., 2023; Schmid, 2013). Such worries are in line with agency theory (Du et al., 2022; Forés et al., 2024), which highlights the potential conflicts arising from external monitoring (Feito-Ruiz and Menéndez-Requejo, 2022; Santos et al., 2014). In this regard, the financing of R&D outsourcing competitiveness through debt may entail external scrutiny, as creditors typically impose restrictions that may limit family owners’ discretion and autonomy over strategic decisions (Feito-Ruiz and Menéndez-Requejo, 2022; Santos et al., 2014). These constraints may be particularly troubling for family owners, whose preference for independence and long-term control makes them less willing to compromise on strategic freedom (Zellweger, 2017).

Pursuing R&D outsourcing competitiveness also often requires family firms to disclose sensitive information about their internal innovation processes, which increases the risk of losing control over proprietary technologies and strategic choices (Almirall and Casadesus-Masanell, 2010; Kotlar et al., 2013). By engaging with external technology partners, such as suppliers, customers or research institutions, family firms benefit from enhanced innovation potential, but they also face greater dependency on these actors (Bigliardi and Galati, 2018; Martínez-Alonso et al., 2023). This dependency introduces significant risks, including diminished control over intellectual property and the firm’s technological trajectory (Martínez-Alonso et al., 2024). For family firms, sharing sensitive knowledge with external actors is often seen as a threat to their strategic autonomy, which may also be exacerbated by the need to use debt financing for innovation efforts (Gjergji et al., 2019; Martínez-Alonso et al., 2022a). Although external knowledge is critical for driving innovation and competitiveness, it may clash with the family’s SEW priorities, as it may compromise their sense of independence and long-term legacy (Berrone et al., 2012; Gómez-Mejía et al., 2007; Naldi et al., 2024). This situation creates a paradox: R&D outsourcing may enhance competitiveness, but it may simultaneously reduce the family firm’s willingness to rely on debt financing, as family firms seek to minimise external influence over their operations and safeguard their control. For family firms, this trade-off underscores the delicate balance between leveraging innovation for competitive advantage and preserving SEW as a cornerstone of their identity and vision for the future (Kotlar et al., 2013; Muñoz-Bullón et al., 2020).

Financing R&D outsourcing competitiveness with increased debt also raises significant concerns for family firms about prolonged financial commitments and the potential impact on the long-term stability of their firm (Ginesti et al., 2023; Muñoz-Bullón et al., 2024). Family firms are inherently long-term oriented, prioritising stability and intergenerational sustainability (Chirico and Kellermanns, 2024; Gil et al., 2024; Miller et al., 2013). Consequently, they often approach debt cautiously, aware that excessive financial obligations can restrict strategic flexibility, hinder future innovation-related investments and limit their ability to adapt to changing conditions (Muñoz-Bullón et al., 2024). Furthermore, the strict repayment schedules related to debt may reduce family firms’ willingness to pursue competitive R&D outsourcing strategies, potentially compromising their resilience and ability to sustain competitive advantage over time (Cirillo et al., 2019). Moreover, the financial burdens associated with increased debt, such as reduced cash flow, heightened risk of default and potential bankruptcy, intensify these concerns (Díaz-Díaz et al., 2023; Hansen and Block, 2021). These financial risks are often accompanied by broader reputational consequences that affect the family’s social standing and community relations (Díaz-Díaz et al., 2023; Serrasqueiro et al., 2020). For family firms, especially those closely tied to the family name, the impact of financial failure goes well beyond economic loss. Such failures threaten the family’s legacy, emotional attachment to the business and broader SEW priorities (Berrone et al., 2012; Gómez-Mejía et al., 2023; Sciascia et al., 2015).

Hence, we argue that family firms’ reluctance to cede control and influence, coupled with their commitment to safeguarding the family legacy and reputation, reduces their willingness to rely on debt to finance R&D outsourcing competitiveness. Based on this reasoning, we propose the following hypothesis.

This study uses data from the ESEE. This survey is conducted annually by the Spanish Ministry of Industry and is designed to collect data from manufacturing firms in Spain. Stratified sampling ensures that surveys are proportionally distributed across the country based on industry and size. This series of government-funded surveys has been conducted in Spain since 1990 in order to collect reliable information on the entire population of Spanish manufacturing firms with 200 or more employees. Furthermore, the surveys include a stratified random sample of 5% of the population of firms with at least 10 and fewer than 200 employees. The data quality is guaranteed by the fact that multiple organisational members of each firm, usually CEOs and administrative and economic-financial staff, completed the survey. Throughout the study period, an average response rate of 90.3% was achieved for the questionnaire, which contains 107 questions with 500 fields (www.fundacionsepi.es). As an institutional database, the ESEE benefits from the oversight of public authorities (Permartín et al., 2024), which ensures a high level of participation and achieves a consistently high response rate. This response rate is a distinct advantage of using the secondary data produced by public agencies (Dorling and Simpson, 1999). Due to its robust characteristics, i.e. its validation process, its reliance on multiple respondents and the objective nature of the information collected, the ESEE has been widely used in academic research on innovation, financing sources and family firms studies, with a focus on private firms (e.g. Kotlar et al., 2014; Manzaneque et al., 2020; Martínez-Alonso et al., 2022b; Mazzelli et al., 2018). We identified private firms in the dataset through a specific question determining whether a company is publicly listed or not.

After removing firms with missing and outlier values, the final sample used in this study consists of 10,584 firm-year observations of privately held manufacturing firms, of which 43.89% correspond to family firms and 56.11% to non-family firms, over a 12-year period (2005–2016). This sample size is comparable to previous ESEE-based studies (e.g. Golovko and Valentini, 2011; Martínez-Alonso et al., 2022b; Ortiz and Gargallo-Castel, 2024) and ensures sufficient statistical power, minimising concerns about overfitting and inflated errors (Harrell, 2015), while preserving the representativeness of the Spanish manufacturing industry. Table 1 offers a more detailed view of the sample, and Table 2 provides the definitions of the variables used in the analysis.

We conducted several panel data fixed-effects regressions. The Hausman test suggests that fixed effect panel regression is more appropriate than random effect regression for all models of interest (chi-square = 158.72; p < 0.000). As such, we used fixed-effect panel regression as our primary analysis tool. Using fixed effects in our regression models helps improve internal validity by minimising or controlling for omitted variable bias due to unobserved heterogeneity (Sun et al., 2018; Zhang and Qi, 2024). This approach ensures more precise and reliable estimates of the effects of the variables of interest over time. Accordingly, the model specification used to test the first hypothesis is:

while the model specification to test the second hypothesis is:

Table 3 reports the means, standard deviations and correlations for the variables used in this study. Notably, the correlation coefficients between the variables analysed are modest, with none exceeding the problematic threshold of 0.80 (Gujarati and Porter, 2008). This result implies that there are no significant multicollinearity concerns. Additionally, in order to test the moderating effect and address potential multicollinearity issues, we took the precaution of mean-centring the independent variable before generating the interaction terms, as Aiken and West (1991) recommended.

Table 4 shows the results of the regression models used to check the hypotheses. H1 posits a positive impact of R&D outsourcing competitiveness on indebtedness. In support of H1, Model A reveals a highly significant positive coefficient (β = 5.928; p < 0.000) for R&D Out Comp. This compelling result suggests that firms that engage in more intensive R&D outsourcing relative to their industry peers tend to maintain higher levels of indebtedness, highlighting decreased agency costs (Jensen and Meckling, 1976), lower information asymmetry concerns and increased borrowing capacity (D’Alfonso and Giannangeli, 2012; Myers and Majluf, 1984). In practical terms, a one percentage point (pp.) improvement in R&D outsourcing competitiveness increases the firm’s indebtedness by 5.928 pp. on average. Using average data, if a private manufacturing firm exhibits an indebtedness of 49.9% (i.e. its total liabilities represent 49.9% of its total assets) and improves its R&D outsourcing competitiveness by one pp., its indebtedness could increase to approximately 55.83% (holding all else constant), suggesting the economic significance of this coefficient.

In order to test the moderating effect predicted in H2, the corresponding interaction term was included in the regression model (Table 3, Model C). H2 proposes that family firms negatively moderate the positive relationship between R&D Out Comp and indebtedness, based on their reluctance to funding innovative strategies with debt to avoid financial distress, to maintain their reputation or to avoid strict creditor monitoring (e.g. Bopaiah, 1998; Santos et al., 2014; Shyu and Lee, 2009). However, the results indicate that the moderating effect of family firm on the relationship between R&D Out Comp and indebtedness is not statistically significant (β = −0.801; p = 0.263). Accordingly, to elaborate more on the effect of family firm on the R&D Out Comp-indebtedness relationship, Models D and E check the effect of R&D outsourcing competitiveness on indebtedness in the subsamples of family and non-family firms respectively (Acedo-Ramírez and Ruiz-Cabestre, 2014; Berrone et al., 2012), revealing a significant positive effect with regard to indebtedness only on the latter (β = 0.923; p < 0.05), while showing a no statistically significant impact in the case of family firms (β = 0.363; p = 0.737).

Moreover, all regression models presented in Table 4 have been re-estimated considering exclusively those firms that have engaged in external R&D activities to put the focus on actively innovating firms (Martínez-Alonso et al., 2020; Van de Vrande et al., 2009). Firms that actually invest in (external) R&D are supposed to be more focused on innovating and improving their competitiveness (Cruz-Cázares et al., 2013), providing a more realistic and accurate view of the innovation competitiveness dynamics (Agazu and Kero, 2024). Furthermore, focusing on firms that already invest in external R&D makes it easier to conduct competitive benchmarking by comparing the external R&D intensity between companies within the same industry (Ahmed, 1998; Radnor and Robinson, 2000). That is, by isolating firms that indeed have developed outsourcing R&D strategies, we can check in a fine-grained manner both the direct effect of R&D outsourcing competitiveness on indebtedness and the moderating effect of being a family firm in the above-mentioned relationship. The results, reported in Table 5, remain consistent with our main analysis but provide additional insights. In this regard, there are slight changes in the significance of some of the regression coefficients. In particular, the coefficient of R&D Out Comp, which was 5.928 in Table 4 (Model A), becomes 2.632 in Table 5 (Model F) and remains highly significant at p = 0.000. In addition, the interaction term R&D Out Comp * family firm becomes significant (β = −1.543; p < 0.05) and negative in Table 5. In practical terms, this means that while a one pp. improvement in R&D outsourcing competitiveness increases the non-family firm’s indebtedness by 2.632 pp. on average, it increases the family firm’s indebtedness by 1.089 pp. on average (a difference of 1.543 pp.). Thus, when focusing on privately held firms that indeed develop external R&D investments, family firms negatively moderate the relationship between R&D outsourcing competitiveness and indebtedness, weakening such a relationship.

Important to note is the fact that we control for potential endogeneity problems (i.e. simultaneity and reverse causality) when estimating our regression models. A key concern in our study is the possibility that firms with higher debt burdens are more likely to engage in R&D outsourcing competitiveness. To address this issue, we lag all explanatory variables (i.e. independent and control variables) with respect to the dependent variable. Furthermore, to mitigate endogeneity concerns, we re-estimate all models using generalised structural equation modelling (GSEM), and the results are very similar to those presented in Tables 4 and 5. This approach is consistent with methods used in previous studies to deal with endogeneity (Liu et al., 2019; López-Delgado et al., 2024; Martínez-Alonso et al., 2022b; Segarra-Blasco et al., 2022). We also ensured that there was no significant multicollinearity bias, as the average values of the variance inflation factor for each regression model were within acceptable limits (<10) (Neter et al., 1989). Moreover, the dependent variable was winsorised at the 1 and 99% levels to control for the influence of extreme values (Diéguez-Soto et al., 2022).

Several robustness checks were performed to validate the results further and check their consistency, which are available upon request from the authors. First, we performed additional analyses to ensure that the results hold across various subsamples. In this regard, findings remain consistent when considering subsamples of different-sized firms. Namely, results hold for the subsamples of both medium and large firms and large firms, but lose significance for the subsample of small firms. Second, we included additional dummy variables to control for territorial specificities or contextual conditions (Camagni and Capello, 2013). To be precise, we have included in our models dummy variables representing seven Spanish territorial subdivisions (NUTS1, Nomenclature des Unités Territoriales Statistiques) ^[2]. Third, we contemplate alternative dependent and independent variables. In this respect, inspired by DeAngelo and Roll (2015) and by He et al. (2021), we ran the models by considering “change in leverage”, i.e. $leveraget$-$leveraget−1$⁠, as the dependent variable. Furthermore, we also ran the models by considering an alternative proxy of “R&D outsourcing competitiveness”. In this case, similarly to Kotlar et al. (2014a, b), we operationalise this variable by considering the sub-industry mean of external R&D intensity instead of the median. In both cases, the results remain exactly the same. Fourth, to further support the obtained results regarding the moderating effect of family firms in the R&D outsourcing competitiveness-indebtedness relationship, we executed additional analyses considering different family firm variables. These variables allow us to delve into the heterogeneity of family firms (Daspit et al., 2021, 2023). In this regard, we first considered “CEO family status” as a moderating variable. That is, we used as a moderator a categorical variable indicating whether there is an identity between ownership and control of the family firm, depending on whether a family owner also occupies the CEO position (Delgado-García et al., 2023; Muñoz-Bullón et al., 2018; Vandemaele and Vancauteren, 2015). Then, as a second analysis, we used “family TMT involvement” as a moderator. In this case, we defined family TMT involvement as the active participation of the controlling family in firm management for family-owned firms (Martínez-Alonso et al., 2020; Martínez-Romero et al., 2023). In view of the above, family TMT involvement is measured as a continuous variable including the number of members of the owner-family involved in the TMT of the firm (Kotlar et al., 2013; Manzaneque et al., 2020; Muñoz-Bullón et al., 2020). The obtained findings reveal the consistency of our results and highlight that, as family involvement increases in family firms, the negative moderating effect is strengthened. Finally, to emphasise the importance of R&D outsourcing competitiveness, we analyse the absolute value of R&D outsourcing expenses on indebtedness, without considering the external R&D intensity of the sub-industry peers. The findings reveal a non-significant impact of R&D outsourcing on indebtedness, thus providing additional support to our main analyses.

This article examines how a competitive strategy based on being ahead of the industry in outsourcing R&D affects the indebtedness of privately held manufacturing firms. This paper seeks to fill two gaps in the research fields of capital structure and family firms, respectively. On the one hand, previous research on capital structure has hardly explored how corporate strategies impact the firms’ financial structure (Cappa et al., 2020; Faria et al., 2024). In particular, studies to date have completely neglected the study of R&D outsourcing as a corporate-strategy dimension that may influence financing decisions and more specifically, how the firm’s R&D outsourcing competitiveness affects indebtedness. On the other hand, prior literature disregards privately held family firms in the R&D outsourcing-capital structure debate.

The results of our empirical analyses on a sample of Spanish privately held manufacturing firms support the argument that firms that compete on the basis of R&D outsourcing are more likely to increase their debt financing. This finding is consistent with previous studies arguing that R&D spending augments the financing deficit and positively impacts indebtedness (Frank and Goyal, 2009). Our results also align with those works stating that the need for external financing increases with the innovative effort because when internal resources are insufficient to meet the financing needs of innovative projects, debt is demanded (Bartoloni, 2013). Furthermore, relying on debt may be considered a strategic option to avoid the dilution of ownership, especially in the manufacturing industry, where keeping a competitive advantage is essential (Bruneo et al., 2024; Kimuam et al., 2025). In addition, recent literature has established that efforts to endorse innovation decrease both financial friction and the probability of financial distress, augmenting debt financing (Faria et al., 2024; Rajaiya, 2023). Likewise, our findings are consistent with the fact that creditors take into account the value of innovation activity when conceding credits (Harasheh et al., 2024). In this respect, our results qualify the findings of previous studies, which show that innovation strategies emphasising (total) R&D are associated with lower leverage (Jordan et al., 1998; O’Brien, 2003; Djabang et al., 2025), due to the high level of specificity or opacity of R&D investments (Vicente-Lorente, 2001) and the fact that they cannot be used as adequate collateral. Accordingly, we argue that R&D outsourcing has different characteristics from internal R&D, making the former more prone to indebtedness. R&D outsourcing investments are characterised by both a low degree of specificity - which reduces the cost of debt- and a low level of opacity - which augments the firm’s borrowing capacity-, diminishing the likelihood of information asymmetry and in turn, creditors’ collateral concerns substantially (Mugo, 2018). In short, from an agency theory perspective, the information asymmetry generated by R&D outsourcing is more affordable than for internal R&D, reducing significantly the financing costs and diminishing the probability of financial difficulties for the firm, thus facilitating access to debt financing (Alexeeva-Alexeev and Mazas-Perez-Oleaga, 2024; Rajaiya, 2023). Moreover, creditors are likely to believe that firms investing in R&D outsourcing are less inclined to be involved in risk-shifting activities, which, in turn, promotes higher leverage ratios (Rajaiya, 2023).

Furthermore, we examine the relationship between R&D outsourcing competitiveness and indebtedness in a context characterised by long-term relationships between lenders and borrowers. For R&D-outsourcing firms, information asymmetry concerns become more assumable, since they are less cautious about disclosing research information because they are less afraid of losing competitiveness (Alexeeva-Alexeev and Mazas-Perez-Oleaga, 2024). This particular arrangement minimises moral hazard and adverse selection problems (Demirguc-Kunt and Levine, 1999), provides greater incentives to monitor R&D outsourcing and explains why the absence of collateral does not hinder leverage (Bougheas, 2004). It may also ensure, among other things, that investment in outsourcing R&D is sustained over time. Furthermore, following the pecking order theory, firms would prefer internal financing, debt and equity, in this order. With this consideration, a firm holding R&D outsourcing is likely to obtain future revenue streams that will enable it to meet its debt obligations. Besides, an R&D-outsourcing firm is more willing to get indebted than to dilute ownership through equity issuance (Kimuam et al., 2025).

Hence, contrary to what might be expected based on prior research (e.g. O’Brien, 2003), when focusing on R&D outsourcing competitiveness, the impact of such innovation strategy on indebtedness is positive. We argue that the low exposure to information asymmetry of firms opting for R&D outsourcing as a corporate strategy minimises the potential agency costs that are decisive in the choice of financing and explains the prevalence of the pecking order perspective.

Indeed, it is of utmost importance to highlight that the strategic relevance of R&D investment to the firm is not revealed in terms of absolute R&D outsourcing but rather in the R&D outsourcing of the firm in comparison to its industry peers. Therefore, the key to determining how innovation strategies have an impact on the level of indebtedness lies not so much in the total amount of outsourcing R&D, but in how innovative the firm is in relation to its peers, and thus, in the strategic importance of innovation for the firm. Accordingly, the strategic significance of outsourcing R&D to the firm will vary within an industry based on whether a firm is trying to be an innovator, a fast follower or a low-cost mass producer (O’Brien, 2003).

Our findings also show that when analysing the relationship between R&D outsourcing competitiveness and indebtedness, by distinguishing between family and non-family firms, this relationship is found to be significant only for the subsample of non-family firms. For family firms, we found no significant effect. This finding is consistent with those papers confirming that family firms first opt for internal rather than external sources of financing (Harasheh et al., 2024; Jansen et al., 2023), and accordingly, R&D investments do not necessarily increase the level of indebtedness. However, when focusing on actively innovating firms (Martínez-Alonso et al., 2020; Van de Vrande et al., 2009), that is, firms that actually carry out (outsourcing) R&D, we see that family firms exert a negative moderating effect on the relationship between R&D outsourcing competitiveness and indebtedness. This result provides a more fine-grained understanding of the manner in which family firms approach the R&D outsourcing competitiveness - leverage link: that is, within the group of firms that consider outsourcing R&D as a strategic priority (Ahmed, 1998; Radnor and Robinson, 2000), family firms are characterised for being more averse than non-family firms to finance R&D outsourcing competitiveness with debt. With this concern, family firms often avoid losing control over the trajectory that technology follows and the firm’s strategic direction, as these may imply losses in SEW (Chirico and Kellermanns, 2024; Gómez-Mejía et al., 2010; Martínez-Alonso et al., 2022a). Our results are also in line with previous scholars who emphasise that family firms often avoid risky strategies that may put at risk the family’s control over the business, the aspiration to perpetuate the family dynasty and to achieve a good reputation in the community (Gómez-Mejía et al., 2025; Martínez-Romero et al., 2023; Muñoz-Bullón et al., 2024). Likewise, family firms limit the use of debt to finance R&D outsourcing competitiveness, as it may jeopardise the family’s financial and human capital tied to the firm (Mishra and McConaughy, 1999). Therefore, SEW preservation, in terms of family control and influence, autonomy or firm reputation, as well as family firms’ concerns regarding the impact of prolonged financial commitments on firms’ long-term stability (Díaz-Díaz et al., 2023; Ginesti et al., 2023; Muñoz-Bullón et al., 2024), will increase the unwillingness of family firms to compete on the basis of R&D outsourcing using debt.

This study makes several important contributions to the literature. Our main contribution lies in examining how a dimension of corporate strategy (Cappa et al., 2020), i.e. R&D outsourcing competitiveness, influences firms’ financial structure. Prior literature has studied different determinants of capital structure, such as firm size, slack, profitability or risk, among others (e.g. Khémiri and Noubbigh, 2018; Ramli et al., 2019). Yet, the impact of corporate strategy on firms’ capital structure has not been sufficiently investigated (Faria et al., 2024) and has only addressed some dimensions of strategy, such as integration (Javorcik and Spatareanu, 2009), diversification (Menéndez-Alonso, 2003), internationalisation (Singh and Nejadmalayeri, 2004), total R&D (O’Brien, 2003) or some of them simultaneously (Cappa et al., 2020). Moreover, this study contributes to a rather narrow stream of literature on the innovation strategy-capital structure relationship (Faria et al., 2024; Romero-Álvarez et al., 2025) by specifically analysing R&D outsourcing competitiveness, taking into consideration that internal and external R&D are different strategies (Howells and Gagliardi, 2008; Van de Vrande et al., 2009). Finally, following the same arguments as O’Brien (2003), this paper claims that the strategic importance of R&D outsourcing for the firm will be manifested in the R&D outsourcing intensity of the firm relative to its industry peers. Therefore, by revealing the effects that the strategic importance of R&D outsourcing competitiveness has on the firm’s capital structure, this study contributes to a better understanding of the influence of R&D outsourcing, relative to industry peers, on financial decisions and helps to achieve a better comprehension of intra-industry changes in capital structure. To the best of our knowledge, this work is the first study to analyse such a relationship. Accordingly, our paper represents an important refinement in terms of both theory building and theory testing (Colquitt and Zapata-Phelan, 2007). Specifically, it provides a novel perspective by examining the unexplored relationship between R&D outsourcing competitiveness and firm leverage, adopting two complementary theories: the agency and the pecking order theories. Additionally, we introduce the moderating effect of family firms, drawing on the behavioural agency approach, to offer new insights into under what conditions this type of business influences the aforementioned relationship. By doing so, this study addresses a notable gap in existing research, which has frequently analysed these factors in isolation. Thus, we advance the understanding of the complex dynamics that shape innovation financing decisions (Faria et al., 2024; Rajaiya, 2023; Romero-Alvarez et al., 2025), with a particular focus on family firms (Córdoba et al., 2024; Díaz-Díaz et al., 2023; Harasheh et al., 2024).

Second, most previous research on capital structure has focused on public firms (e.g. Acedo-Ramírez and Ruiz-Cabestre, 2014), a small number of studies cover privately held firms (Diéguez-Soto and López-Delgado, 2019; Romero-Álvarez et al., 2025), and far fewer articles refer to private family firms (Comino-Jurado et al., 2021a, b; López-Delgado and Diéguez-Soto, 2020). By focusing on the distinct influence of family firms’ propensity to maintain family control and SEW (Gómez-Mejía et al., 2007), this paper examines the contingent effect of being a family firm (López-Delgado et al., 2024; Rojo-Ramírez et al., 2022) in the relationship between R&D outsourcing competitiveness and indebtedness, which has not been considered in previous research. On the one hand, financing R&D outsourcing competitiveness with leverage can bring many benefits for family firms in terms of equity preservation, lower cost of debt, tax avoidance or firm growth (Cirillo et al., 2019; Díaz-Díaz et al., 2024; Harasheh et al., 2024). Nevertheless, family firms tend to prefer strategies that preserve their autonomy and discretion over technological choices and R&D outsourcing competitiveness implies sharing this control with external parties (Almirall and Casadesus-Masanell, 2010; Kotlar et al., 2013; Martínez-Alonso et al., 2022a). On the other hand, financing R&D outsourcing with debt may weaken the family’s control over the firm, hinder the perpetuity of the family dynasty and compromise the family’s public reputation, as debt financing might limit the strategic flexibility, influence and autonomy of family firms (Cirillo et al., 2019; Ginesti et al., 2023), as well as posing potential risks such as vulnerability of ownership and financial stress (Prencipe et al., 2008; Zellweger, 2017). Therefore, by emphasising the manner in which family firms weaken the relationship between the R&D outsourcing competitiveness and firm indebtedness, this article contributes to the understanding of family firms’ risk-taking behaviour (Chrisman and Patel, 2012; Craig et al., 2014; Rojo-Ramírez et al., 2022) in the fields of technology strategy and capital structure.

Furthermore, we also contribute to the current family firm heterogeneity conceptual debate (Chua et al., 2012; Daspit et al., 2021, 2023). To this end, we focus on heterogeneity at the firm level by noting differences within family firms depending on whether they invest or not in R&D outsourcing and the subsequent effect on their capital structure (Córdoba et al., 2024; Harasheh et al., 2024). Thus, family firms that follow an R&D outsourcing competitiveness strategy adopt different capital structures than those that do not consider this type of innovation as a strategic priority. Furthermore, by using longitudinal data, we are able to analyse how these specific differences regarding R&D outsourcing change over time (Chirico and Kellermanns, 2024; Martínez-Alonso et al., 2024, 2025), contributing to advance the collective understanding of dynamic heterogeneity (Daspit et al., 2023).

This study not only contributes to academic knowledge but also provides actionable insights for those involved in the practical arena of investment, management and policy-making. First, a better understanding of the relationship between R&D outsourcing competitiveness and firm indebtedness can enable investors to consider greater nuances in their investment portfolios. As we theoretically argued and empirically tested, firms that seek to compete via R&D outsourcing do not resort to debt by chance but pursue the advantages it inherently brings. At the same time, lenders also see incentives to respond favourably to firms’ intention to use debt to finance their R&D outsourcing strategy. Unlike in-house innovation, which exhibits greater limitations in terms of specificity, transparency and lack of collateral, R&D outsourcing competitiveness emerges as a strategic alternative with a lower cost of debt and greater leverage capacity. In this vein, creating a national platform showing firms’ innovation strategies, in terms of R&D competitiveness, would enhance the informational efficiency of the market and improve creditors’ decision-making. Thus, our findings could be useful for investors to consider this novel nuance when investing in private manufacturing firms. Despite this, investors are also advised to navigate the investment landscape with a critical eye on family firms. In this sense, they should be aware that, within actively innovating firms in terms of external R&D, family firms can exhibit a particular behaviour, weakening the advantages of using debt for competing on the basis of R&D outsourcing, in order to preserve their SEW.

Second, it is crucial for firm managers to interpret the association between R&D outsourcing competitiveness and indebtedness as an intriguing financing strategy. Our findings suggest that, beyond the several benefits private firm managers pursue by using debt to finance the R&D outsourcing competitiveness strategy, the favourable signal that this strategy exerts on lenders allows firms to decrease creditors’ collateral concerns, reduce the cost of debt and increase their borrowing capacity. Hence, our research encourages managers to understand and, therefore, exploit the financing implications of competing on the basis of R&D outsourcing to optimise their capital structure. Moreover, when turning to family firms, our results reveal a critical practical insight in terms of heterogeneity: not all family firms are alike, particularly in how they approach innovation financing. Those family firms that strategically prioritise R&D outsourcing behave differently from those that do not: the former are more reluctant to use debt to finance innovation, even when it could enhance their competitiveness. In this regard, family firms may perceive the increase in indebtedness as a threat to their SEW, in terms of control, reputation, legacy and intergenerational sustainability. However, family firms should not always see debt as a threat to SEW but as a strategic lever to fund R&D outsourcing without diluting ownership or resorting to more expensive capital. Accordingly, family firms should be encouraged to take advantage of the positive signals that R&D outsourcing sends to financial markets, helping to optimise their capital structure and strengthen their long-term competitiveness. This can be supported by financial instruments suited to family firms’ sensitivities, such as loans linked to specific R&D outcomes, family-controlled debt structures or progressive financing schemes ^[3]. In this way, it will be possible to balance SEW preservation with a bold and sustainable innovation strategy, recognising the internal differences within family firms and promoting more focused and effective management of their strategic diversity.

Third and lastly, policymakers can also use our insights into their decision-making. It is widely known that several firms face financing barriers, and those that manage to navigate this challenge often do so at a high cost, materialising in capital structures that are not optimised to face long-term vicissitudes. Due to the macroeconomic relevance of private manufacturing firms in general and family firms in particular, public policies could be designed to reduce the barriers that firms often face when deciding to compete on the basis of R&D outsourcing, including specific subsidies or tax incentives. Moreover, given the peculiar behaviour of family firms that consider R&D outsourcing as a strategic priority, advisors and policymakers should identify family firms truly committed to competing through R&D outsourcing and tailor their financial advice accordingly. With such initiatives, the adoption of strategies such as R&D outsourcing competitiveness will be promoted, allowing firms not only to become more innovative but also building long-term relationships with lenders that, besides conferring several advantages both on the demand- and supply-sides, will optimise their capital structures, helping them to prevent business failure.

While our paper sheds light on important aspects, its inherent limitations point to future research directions. Although the decision to focus on Spanish firms is justified by the favourable financial market conditions (Díaz-Díaz et al., 2023), the findings need to be further validated in other countries and regions. Future studies should explore potential mediating variables, such as innovation capabilities or financial management practices, to improve our understanding of the observed relationships. Cross-industry comparative analyses can assess whether the identified relationships hold in different business environments (Artz et al., 2010; Schamberger et al., 2013). In addition, the integration of qualitative methods (Erdogan et al., 2020; Kammerlander et al., 2015; Shaw et al., 2024), such as case studies and interviews, can provide richer insights into how firms manage R&D outsourcing competitiveness, indebtedness and family firm dynamics. Taken together, these steps should contribute to a deeper and more comprehensive understanding of the subject.

The authors would like to thank the editors and the two anonymous reviewers. The comments and suggestions received during the review process have contributed significantly to the improvement of the paper.

Funding: The study was supported by the Castilla-La Mancha Regional Government (No: SBPLY/21/180225/000110) and by the University of Almería's Own Research and Transfer Plan: (1) PPIT-UAL, Junta de Andalucía-ERDF 2021-2027, Objective RSO1.1, Programme: 54.A and (2) PPIT-UAL, Proyectos de Investigación Lanzadera (P_LANZ_2024/005). Antonio Molina-García's work was funded by the Spanish Ministry of Education and Vocational Training (FPU) (No: FPU20/02328).