Short-term loans and Firms' high-quality innovation: Evidence from the access to patent-backed loans in China

Zhao Rong, Fuxin Zhang and Shi Chen

China Economic Review, 2023, vol. 78, issue C

Abstract: When obtaining short-term loans, an innovative firm tends to expand its production scale, thereby reallocating its R&D-related resources away from innovation. By exploiting the unique situation in China that patenting firms for the first time obtained short-term patent-backed loans (PBLs), we find that the PBL access negatively influences firms' propensities of producing high-quality innovation. Consistent with the R&D resource reallocation hypothesis, we find that this negative effect exists only among firms initially having invention patents; it is more pronounced when the PBL covers a larger portion of firm investment and when these firms expand more aggressively. We confirm the scale expansion effect by finding that the PBL access positively influences firms' subsequent size.

Keywords: Patent collateral; Innovation; Industrial firms; China (search for similar items in EconPapers)
JEL-codes: G20 G32 O31 O32 O33 (search for similar items in EconPapers)
Date: 2023
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:chieco:v:78:y:2023:i:c:s1043951x23000032

DOI: 10.1016/j.chieco.2023.101918

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