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Banks and Innovation: Microeconometric Evidence on Italian Firms

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  • Luigi Benfratello

    (Università di Torino)

  • Fabio Schiantarelli

    ()
    (Boston College)

  • Alessandro Sembenelli

    (Università di Torino)

Abstract

This paper contains a detailed empirical investigation of the effect of local banking development on firms' innovative activities, using a rich data set on innovation at the firm level for a large number of Italian firms over the 90's. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D.

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Bibliographic Info

Paper provided by Boston College Department of Economics in its series Boston College Working Papers in Economics with number 631.

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Date of creation: 30 Oct 2005
Date of revision: 13 Jun 2007
Handle: RePEc:boc:bocoec:631

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Keywords: Banks; Financial Development; Innovation; R&D; Investment;

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