Economics Department
Working Papers in Economics
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TITLE:
Banks and Innovation: Microeconometric Evidence on Italian Firms
AUTHOR(S):
Luigi Benfratello, Università di Torino
Fabio Schiantarelli, Boston College
Alessandro Sembenelli, Università di Torino
DOCUMENT TYPE: Article
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ABSTRACT:
This paper contains a detailed empirical investigation of the effect of local banking development on firms' innovative activities, using a rich data set on innovation at the firm level for a large number of Italian firms over the 90's. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D.