I build a dynamic model to examine how financial constraints and competition affect firms' research and development (“R&D”) strategies. I show that first, financially constrained firms with risky cash flows can optimally overinvest relative to the first best; this is due to the project...

I build a dynamic model to examine how financial constraints and competition affect firms' research and development ("R&D") strategies. I show that first, financially constrained firms with risky cash flows can optimally over-invest relative to the first best; this is due to the project...