RELATIONSHIP LENDING AND INNOVATION: EMPIRICAL EVIDENCE ON A SAMPLE OF EUROPEAN FIRMS

Stefania Cosci (), Valentina Meliciani () and Valentina Sabato ()
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Stefania Cosci: LUMSA University
Valentina Meliciani: University of Teramo
Valentina Sabato: LUMSA University

No wpC04, CERBE Working Papers from CERBE Center for Relationship Banking and Economics

Abstract: This paper investigates the impact of relationship lending on innovation (the probability to innovate and the intensity of innovation). Using a unique dataset providing detailed information on bank-firm relationships across European firms, we relate different proxies of relationship lending (soft information, long-lasting relationships, number of banks, share of the main bank) to innovation. We find a very strong and robust positive effect of ‘soft-information intensive’ relationships, a less robust positive effect of long-lasting relationships and a negative effect of credit concentration as measured by the number of banking relationships. We also find that ‘soft-information intensive’ relationships reduce credit rationing for innovative firms, while long-lasting relationships seem to favour innovation via other relational channels. These results raise some concern on the impact of screening processes based on automatic procedures, as those suggested by the Basel rules, on firms’ capability to finance innovative activities in Europe.

Keywords: relationship lending; innovation; R&D; credit constraints; soft information (search for similar items in EconPapers)
JEL-codes: G10 G21 G30 O30 O31 (search for similar items in EconPapers)
Pages: 36 pages
Date: 2015-03
New Economics Papers: this item is included in nep-cfn, nep-cse, nep-ent, nep-eur and nep-ino
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (9)

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