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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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