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External Financing Constraints and Firm Innovation

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  • Marek Giebel
  • Kornelius Kraft

Abstract

We investigate the effect of individual banks affected by the recent financial crisis of 2008/2009 on the innovation activities of their business customers. Firms associated with a bank that relies strongly on the interbank market are more likely to be exposed to a credit supply shock during the financial crisis and therefore face external financing constraints. Exploiting both the extensive and the intensive margin, our difference‐in‐differences 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. Tests for additional expenditures reveal that marketing expenditures show a lower or even no sensitivity to bank financing during the financial crisis.

Suggested Citation

  • Marek Giebel & Kornelius Kraft, 2019. "External Financing Constraints and Firm Innovation," Journal of Industrial Economics, Wiley Blackwell, vol. 67(1), pages 91-126, March.
    • Handle: RePEc:bla:jindec:v:67:y:2019:i:1:p:91-126
    DOI: 10.1111/joie.12197
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    Cited by:

    1. Czarnitzki, Dirk & Giebel, Marek, 2021. "Financial constraints for R&D and innovation: New evidence from a survey experiment," ZEW Discussion Papers 21-084, ZEW - Leibniz Centre for European Economic Research.
    2. Fayu Chen & Jinhao Liu & Xiaoyu Liu & Hua Zhang, 2023. "Static and Dynamic Evaluation of Financing Efficiency in Enterprises’ Low-Carbon Supply Chain: PCA–DEA–Malmquist Model Method," Sustainability, MDPI, vol. 15(3), pages 1-17, January.
    3. GuoHua Cao & WenJun Geng & Jing Zhang & Qi Li, 2023. "Social network, financial constraint, and corporate innovation," Eurasian Business Review, Springer;Eurasia Business and Economics Society, vol. 13(3), pages 667-692, September.
    4. Hongyu Li & Zhiqiang Lu & Qili Yin, 2023. "The Development of Fintech and SME Innovation: Empirical Evidence from China," Sustainability, MDPI, vol. 15(3), pages 1-14, January.
    5. Kraft, Kornelius & Lammers, Alexander, 2021. "The Effects of Reforming a Federal Employment Agency on Labor Demand," IZA Discussion Papers 14629, Institute of Labor Economics (IZA).
    6. Peisen LIU & Yufeng XIA, 2021. "Bank Competition and Firm Innovation Output: The Role of Financing Constraints," Journal for Economic Forecasting, Institute for Economic Forecasting, vol. 0(4), pages 171-188, December.
    7. Zhang, Wenjie & Zhang, Na, 2023. "How corporate social responsibility affects firms' innovation capability: A perspective on information and resource effects," Finance Research Letters, Elsevier, vol. 55(PA).
    8. Luo, Lianfa & Cheng, Zhiming & Ye, Qingqing & Cheng, Yanjun & Smyth, Russell & Yang, Zhiqing & Zhang, Le, 2023. "Nonmonetary Awards and Innovation: Evidence from Winning China's Top Brand Contest," GLO Discussion Paper Series 1345, Global Labor Organization (GLO).
    9. Han, Xun & Ma, Sichao & Peng, Yuchao & Xie, Xinyan, 2022. "Central bank communication, corporate maturity mismatch and innovation," International Review of Financial Analysis, Elsevier, vol. 84(C).
    10. Kraft, Kornelius & Lammers, Alexander, 2021. "Bargaining Power and the Labor Share - a Structural Break Approach," VfS Annual Conference 2021 (Virtual Conference): Climate Economics 242342, Verein für Socialpolitik / German Economic Association.
    11. Lu, Angdi & Zhang, Jiang & Li, Jie, 2023. "The impact of export VAT rebate reduction on firms' pollution emissions: Evidence from Chinese enterprises," Energy Economics, Elsevier, vol. 120(C).
    12. Giebel, Marek & Kraft, Kornelius, 2020. "Bank credit supply and firm innovation behavior in the financial crisis," Journal of Banking & Finance, Elsevier, vol. 121(C).
    13. Tianjian Yang & Minghui Han & Yilin Zhong & Junhao Zhong & Qinghua Zhang, 2023. "Relationship between financial development and intelligent transformation of manufacturing: evidence from 69 countries," Economic Change and Restructuring, Springer, vol. 56(5), pages 3437-3474, October.
    14. Giebel, Marek & Kraft, Kornelius, 2020. "R&D investment under financing constraints," ZEW Discussion Papers 20-018, ZEW - Leibniz Centre for European Economic Research.

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