Geographical Organization of Banking Systems and Innovation Diffusion

Pietro Alessandrini, Andrea Presbitero and Alberto Zazzaro ()

Chapter Chapter 5 in The Changing Geography of Banking and Finance, 2009, pp 75-108 from Springer

Abstract: Abstract The empirical literature is largely supportive of the importance of financial constraints and identifies local banking development and relationship lending as possible determinants of firms’ propensity to innovate. In this chapter, we argue that the spatial organization of banking systems and the distance of local branches from banks’ decisional centers are major factors influencing the effectiveness in collecting and processing soft information on local innovative firms. We provide evidence showing that, while branch density and the length of credit relationships have a positive causal effect on innovation when considered singularly, after controlling for the functional distance between the banking system and the local economy they lose statistical significance in favor of the latter. In this perspective, our results suggest that the geographical organization of banks and the spatial distribution of their headquarters represent key variables for local development.

Keywords: Banking System; Product Innovation; Soft Information; Bank Relationship; Innovation Adoption (search for similar items in EconPapers)
Date: 2009
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Working Paper: Geographical Organization of Banking Systems and Innovation Diffusion (2008)
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DOI: 10.1007/978-0-387-98078-2_5

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