External Financing Constraints and Firm's Innovative Activities During the Financial Crisis

29 Pages Posted: 15 Dec 2017

See all articles by Marek Giebel

Marek Giebel

Copenhagen Business School - Department of Economics

Kornelius Kraft

University of Dortmund - Department of Economics; IZA Institute of Labor Economics

Date Written: 2017

Abstract

We investigate the effect of individual banks’ liquidity shocks during the recent financial crisis of 2008/2009 on the innovation activities of their business customers. Individual banks’ liquidity shocks are identified by the degree of interbank market usage. We use a difference-in-differences approach to identify the effect of interbank reliance during the crisis on total innovation expenditures in comparison to the periods before. Our results imply that those firms which have a business relation to a bank with higher interbank market reliance reduce their innovation activities during the financial crisis to a higher degree than other firms.

Keywords: Financial crisis, financial constraints of banks, financing of innovation, innovation activity

JEL Classification: G01, G21, G30, O16, O30, O31

Suggested Citation

Giebel, Marek and Kraft, Kornelius, External Financing Constraints and Firm's Innovative Activities During the Financial Crisis (2017). ZEW - Centre for European Economic Research Discussion Paper No. 17-064, Available at SSRN: https://ssrn.com/abstract=3087898 or http://dx.doi.org/10.2139/ssrn.3087898

Marek Giebel (Contact Author)

Copenhagen Business School - Department of Economics ( email )

Denmark

Kornelius Kraft

University of Dortmund - Department of Economics ( email )

D-44221 Dortmund
Germany
+49 231 755-3152 (Phone)
+49 231 755-3155 (Fax)

IZA Institute of Labor Economics

P.O. Box 7240
Bonn, D-53072
Germany

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