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Did bank distress stifle innovation during the Great Depression?

Ramana Nanda () and Tom Nicholas

Journal of Financial Economics, 2014, vol. 114, issue 2, 273-292

Abstract: We find a negative relationship between bank distress and the level, quality and trajectory of firm-level innovation during the Great Depression, particularly for R&D firms operating in capital intensive industries. However, we also show that because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.

Keywords: Great Depression; Patents; R&D; Bank distress (search for similar items in EconPapers)
JEL-codes: N22 G21 O30 (search for similar items in EconPapers)
Date: 2014
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