Product Innovation and Credit Market Disruptions

75 Pages Posted: 5 Nov 2019 Last revised: 22 Sep 2020

See all articles by Joao Granja

Joao Granja

University of Chicago - Booth School of Business

Sara Moreira

Northwestern University

Date Written: November 1, 2019


We provide new evidence that disruptions in firm's access to credit during the recent financial crisis had significant effects on product innovation in the consumer-goods sector. We combine highly granular retail-scan data with lending data from the Community Reinvestment Act and Dealscan and we find that credit-constrained firms introduced fewer new products, those products were less novel, and the new products sold less well. The most affected firms were smaller, younger, more dependent of external financing, and make more capital-intensive products, suggesting that credit frictions were responsible for the reduced innovation. Overall, these findings suggest that disruptions to credit markets make firms innovate less and less boldly.

Keywords: Innovation; Multi-Product Firms; Financial Constraints; Great Recession

JEL Classification: G11, G21, G31, G32, L15, L25, O31, O32

Suggested Citation

Granja, Joao and Moreira, Sara, Product Innovation and Credit Market Disruptions (November 1, 2019). Available at SSRN: or

Joao Granja (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 South Woodlawn Avenue
Room 326
Chicago, IL 60637
United States

Sara Moreira

Northwestern University ( email )

2001 Sheridan Road
Evanston, IL 60208
United States

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