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Financing Creative Destruction

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  • Samaniego, Roberto

Abstract

This paper uncovers evidence of s potentially important channel linking financial development to growth: the financing of innovations introduced by entrepreneurs. Using internationally comparable data on European countries, entry and exit in research-intensive industries are found to be disproportionately sensitive to the level of financial development. Furthermore, financial development is related to increased R&D spending. The results are robust to several different measures of financial development, and are supported by surveys of the sources of finance used by entrepreneurs. The evidence suggests that intellectual property rights provide the institutional underpinning for financial markets to direct funds towards innovative entrepreneurs.

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Bibliographic Info

Paper provided by University Library of Munich, Germany in its series MPRA Paper with number 22348.

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Date of creation: 10 Dec 2009
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Handle: RePEc:pra:mprapa:22348

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Related research

Keywords: Entry; exit; financial development; creative destruction; R&D intensity; entrepreneurship; intellectual property rights.;

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References

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  1. Hellmann, Thomas & Puri, Manju, 2000. "The Interaction between Product Market and Financing Strategy: The Role of Venture Capital," Review of Financial Studies, Society for Financial Studies, vol. 13(4), pages 959-84.
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  8. Jonathan Eaton & Samuel Kortum, 2000. "Trade in Capital Goods," Boston University - Department of Economics - The Institute for Economic Development Working Papers Series dp-109, Boston University - Department of Economics.
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  10. Geert Bekaert & Campbell R. Harvey & Christian Lundblad, 2001. "Does Financial Liberalization Spur Growth?," NBER Working Papers 8245, National Bureau of Economic Research, Inc.
  11. Marco Cagetti & Mariacristina De Nardi, 2003. "Entrepreneurship, frictions, and wealth," Staff Report 322, Federal Reserve Bank of Minneapolis.
  12. Edward P. Lazear, 2004. "Balanced Skills and Entrepreneurship," American Economic Review, American Economic Association, vol. 94(2), pages 208-211, May.
  13. Anton, James J & Yao, Dennis A, 1994. "Expropriation and Inventions: Appropriable Rents in the Absence of Property Rights," American Economic Review, American Economic Association, vol. 84(1), pages 190-209, March.
  14. North, Douglass C., 1984. "Government and the Cost of Exchange in History," The Journal of Economic History, Cambridge University Press, vol. 44(02), pages 255-264, June.
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  16. Anna Ilyina & Roberto M. Samaniego, 2008. "Technology and Finance," IMF Working Papers 08/182, International Monetary Fund.
  17. White, Halbert, 1980. "A Heteroskedasticity-Consistent Covariance Matrix Estimator and a Direct Test for Heteroskedasticity," Econometrica, Econometric Society, vol. 48(4), pages 817-38, May.
  18. Maria Fuensanta Morales, 2000. "Financial Intermediation in a Model of Growth Through Creative Destruction," Econometric Society World Congress 2000 Contributed Papers 0914, Econometric Society.
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Cited by:
  1. Ilyina, Anna & Samaniego, Roberto, 2012. "Structural change and financing constraints," Journal of Monetary Economics, Elsevier, vol. 59(2), pages 166-179.

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