Amore, Mario Daniele2; Schneider, Cédric1; Žaldokas, Alminas3
1 Department of Economics, Copenhagen Business School2 Università Luigi Bocconi3 Hong Kong University of Science and Technology
We present evidence that banking development plays a key role in technological progress. We focus on manufacturing firms' innovative performance, measured by patent-based metrics, and employ exogenous variations in banking development arising from the staggered deregulation of banking activities across US states during the 1980s and 1990s. We find that interstate banking deregulation had significant beneficial effects on the quantity and quality of innovation activities, especially for firms highly dependent on external capital and located closer to entering banks. Furthermore, we find that these results are strongly driven by a greater ability of deregulated banks to geographically diversify credit risk.
Journal of Financial Economics, 2013, Vol 109, Issue 3, p. 835-855