Did bank lending stifle innovation in Europe during the Great Recession?
|Title:||Did bank lending stifle innovation in Europe during the Great Recession?||Authors:||Peia, Oana; Romelli, 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the Authors||Keywords:||Financial frictions; Investment; Innovation; R&D spending||Language:||en||Status of Item:||Not peer reviewed|
|Appears in Collections:||Economics Working Papers & Policy Papers|
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