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Financial conditions and green R&D

Author

Listed:
  • Luca Fornaro

  • Veronica Guerrieri
  • Will Hotten
  • Lucrezia Reichlin

Abstract

This paper studies how financial conditions affect research and development (R&D) by firms specialized in green innovation. Using U.S. patent data matched with Compustat, we identify “green innovators” as firms with a high cumulative share of green patents. Although they account for a small share of total green patenting, these firms occupy central positions in the green-innovation ecosystem. Estimating firm-level impulse responses to exogenous changes in broad financial conditions, we find that tightening has a disproportionately large and persistent negative effect on the R&D of specialized green innovators. In contrast, R&D by diversified innovators and non-innovators responds only weakly. Green innovators are younger, smaller, and more dependent on external finance, suggesting that financial tightening introduces a systematic bias against upstream green technological development.

Suggested Citation

  • Luca Fornaro & Veronica Guerrieri & Will Hotten & Lucrezia Reichlin, 2026. "Financial conditions and green R&D," Economics Working Papers 1946, Department of Economics and Business, Universitat Pompeu Fabra.
    • Handle: RePEc:upf:upfgen:1946
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    References listed on IDEAS

    as
    1. Kremer, Manfred & Lo Duca, Marco & Holló, Dániel, 2012. "CISS - a composite indicator of systemic stress in the financial system," Working Paper Series 1426, European Central Bank.
    2. repec:ecb:ecbwps:20111426 is not listed on IDEAS
    3. Jee, Su Jung & Srivastav, Sugandha, 2024. "Knowledge spillovers between clean and dirty technologies: Evidence from the patent citation network," Ecological Economics, Elsevier, vol. 224(C).
    4. Luca Fornaro & Veronica Guerrieri & Lucrezia Reichlin, 2025. "Monetary policy for the green transition," BIS Papers, Bank for International Settlements, number 160.
    5. Mikkel Plagborg‐Møller & Christian K. Wolf, 2021. "Local Projections and VARs Estimate the Same Impulse Responses," Econometrica, Econometric Society, vol. 89(2), pages 955-980, March.
    6. Giroud, Xavier & Mueller, Holger M., 2021. "Firm leverage and employment dynamics," Journal of Financial Economics, Elsevier, vol. 142(3), pages 1381-1394.
    7. Lauren Cohen & Umit G. Gurun & Quoc H. Nguyen, 2020. "The ESG-Innovation Disconnect: Evidence from Green Patenting," NBER Working Papers 27990, National Bureau of Economic Research, Inc.
    Full references (including those not matched with items on IDEAS)

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