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Customers’ Debt Financing and Suppliers’ Innovations

Author

Listed:
  • Gam, Yong Kyu
  • Gupta, Pia
  • Kwon, Kyoung-min
  • Shin, Hojong

Abstract

In this study, we empirically investigate the influence of customers’ debt financing on suppliers’ innovation activities, measured by the number of patents, exploration, and exploitation. We find that syndicated loan issuance to key customers positively impacts the number of patents held by suppliers, primarily due to an increase in exploration activities. The results are stronger when the size of the loan to the key customer is larger. Additional tests indicate that the positive effects of customers’ debt financing on suppliers’ exploration weakens when suppliers exhibit a high economic dependence on these customers.

Suggested Citation

  • Gam, Yong Kyu & Gupta, Pia & Kwon, Kyoung-min & Shin, Hojong, 2025. "Customers’ Debt Financing and Suppliers’ Innovations," Economics Letters, Elsevier, vol. 255(C).
    • Handle: RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003520
    DOI: 10.1016/j.econlet.2025.112515
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    References listed on IDEAS

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    Keywords

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    JEL classification:

    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • L14 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Transactional Relationships; Contracts and Reputation
    • O3 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights

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