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Rent-seeking in bank credit and firm R&D innovation: The role of industrial agglomeration

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  • Li, Yunhe
  • Tina Zhang, Xiaotian

Abstract

Employing World Bank's survey data on the Chinese business environment, we empirically investigate the role of industrial agglomeration in moderating the effect of rent-seeking in bank credit on firm R&D innovation. The results show that rent-seeking in bank credit impedes firm R&D innovation, while industrial agglomeration corrects this impeding effect, which is also robust when considering endogenous problems. Furthermore, the results show that the moderating role of industrial agglomeration in correcting the negative effect of rent-seeking in bank credit on firm R&D innovation is more prominent for SMEs, non-state firms, and firms with more severe financial constraints. These findings suggest that the spatial agglomeration of industries can effectively alleviate the suppression effect of rent-seeking in credit corruption on firm R&D innovation, highlighting ways to promote firm R&D innovation in China's financially repressive environment.

Suggested Citation

  • Li, Yunhe & Tina Zhang, Xiaotian, 2023. "Rent-seeking in bank credit and firm R&D innovation: The role of industrial agglomeration," Journal of Business Research, Elsevier, vol. 159(C).
    • Handle: RePEc:eee:jbrese:v:159:y:2023:i:c:s0148296322009195
    DOI: 10.1016/j.jbusres.2022.113454
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