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Banking Consolidation and Small Firm Financing for Research and Development

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Abstract

This paper examines the effect of increased market concentration of the banking industry caused by the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) on the availability of finance for small firms engaged in research and development (R&D). I measure the financing decisions of these small firms using a balanced panel of Small Business Innovation Research (SBIR) applications. Using difference-in-differences, I find IBBEA decreased the supply of finance for small R&D firms. This effect is larger for late adopters of IBBEA, which tended to be states with stronger small banking sectors pre-IBBEA.

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  • Andrew C. Chang, 2016. "Banking Consolidation and Small Firm Financing for Research and Development," Finance and Economics Discussion Series 2016-029, Board of Governors of the Federal Reserve System (U.S.).
    • Handle: RePEc:fip:fedgfe:2016-29
    DOI: 10.17016/FEDS.2016.029
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    More about this item

    Keywords

    Banking Deregulation; IBBEA; Interstate Bank Branching Deregulation; Market Concentration; Research and Development; Riegle-Neal; Small Business Innovation Research;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • G39 - Financial Economics - - Corporate Finance and Governance - - - Other
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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