Did bank lending stifle innovation in Europe during the Great Recession?

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Title: Did bank lending stifle innovation in Europe during the Great Recession?
Authors: Peia, OanaRomelli, Davide
Permanent link: http://hdl.handle.net/10197/11198
Date: Nov-2019
Online since: 2019-11-14T12:02:45Z
Abstract: Using the 2008-09 Global Financial crisis and the 2012 Euro area sovereign debt crisis as natural experiments, we investigate the effects of contractions in credit supply on R&D spending in a large sample of European firms. Our identification strategy exploits differences in financial constraints across firms, as well as the cross-industry variation in dependence on external finance, to identify a causal effect of bank credit supply on firm investment in innovation. We show that firms that are more likely financially constrained, in industries more dependent on external finance, have a disproportionally lower growth rate of R&D spending, as well as lower R&D intensity and share of R&D investment in total investment during periods of tight credit supply. These results are robust to different proxies of financial constraints, model specifications and fixed-effects identification strategies.
Type of material: Working Paper
Publisher: University College Dublin. School of Economics
Start page: 1
End page: 38
Series/Report no.: UCD Centre for Economic Research Working Paper Series; WP2019/26
Copyright (published version): 2019 the Authors
Keywords: Financial frictionsInvestmentInnovationR&D spending
Language: en
Status of Item: Not peer reviewed
Appears in Collections:Economics Working Papers & Policy Papers

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