Please use this identifier to cite or link to this item: https://hdl.handle.net/10419/33408 
Year of Publication: 
2006
Series/Report no.: 
IZA Discussion Papers No. 2032
Publisher: 
Institute for the Study of Labor (IZA), Bonn
Abstract: 
In this paper we investigate the effect of local banking development on firms' innovative activities, using a rich data set on innovation for a large number of Italian firms over the 1990's. There is evidence that banking development affects the probability of process innovation, particularly for small firms and for firms in high(er) tech sectors and in sectors more dependent upon external finance. The evidence for product innovation is weaker. There is also some evidence that banking development reduces the cash flow sensitivity of fixed investment spending, particularly for small firms, and that it increases the probability they will engage in R&D.
Subjects: 
banks
financial development
innovation
R&D
investment
JEL: 
D24
G21
G38
O31
O33
Document Type: 
Working Paper

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