Customers’ Debt Financing and Suppliers’ Innovations

Yong Kyu Gam, Pia Gupta, Kyoung-min Kwon and Hojong Shin

Economics Letters, 2025, vol. 255, issue C

Abstract: In this study, we empirically investigate the influence of customers’ debt financing on suppliers’ innovation activities, measured by the number of patents, exploration, and exploitation. We find that syndicated loan issuance to key customers positively impacts the number of patents held by suppliers, primarily due to an increase in exploration activities. The results are stronger when the size of the loan to the key customer is larger. Additional tests indicate that the positive effects of customers’ debt financing on suppliers’ exploration weakens when suppliers exhibit a high economic dependence on these customers.

Keywords: Corporate debt financing; Innovation; Exploration; Exploitation; Customer-supplier relationship (search for similar items in EconPapers)
JEL-codes: G32 L14 O3 (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecolet:v:255:y:2025:i:c:s0165176525003520

DOI: 10.1016/j.econlet.2025.112515

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