External Financing Constraints and Firm Innovation (WP Version) (with Kornelius Kraft), forthcoming at the Journal of Industrial Economics
We investigate the effect of individual banks affected by the recent financial crisis of 2008/2009 on the innovation activities of their business customers. Firms associated with a bank that relies strongly on the interbank market are more likely to be exposed to a credit supply shock during the financial crisis and therefore face external financing constraints. Exploiting both the extensive and the intensive margin, our difference-in-differences results imply that those firms which have a business relation to a bank with higher interbank market reliance reduce their innovation activities during the financial crisis to a higher degree than other firms. Tests for additional expenditures reveal that marketing expenditures show a lower or even no sensitivity to bank financing during the financial crisis.
The Impact of the Financial Crisis on Capital Investments in Innovative Firms (with Kornelius Kraft), forthcoming at Industrial and Corporate Change
This article investigates the impact of the financial crisis on decisions by innovative versus non-innovative firms regarding capital investments. This question is of particular interest, as distortions of financial markets especially affect innovative firms (i.e., firms with riskier business models) and thereby impact economic growth. The empirical test is based on German establishment data for the years 2004–2011, thus before and during the recent financial crisis. It turns out that innovative firms using external sources for investment finance reduce their capital expenditures during the financial crisis to a larger extent than (i) non-innovative firms using external finance and (ii) innovative firms not using external finance. Moreover, our results remain robust when we control for demand-side factors, test for effects of other financing sources like equity, employ different definitions of the treatment status, or vary the sample size. Finally, our study implies that innovative firms with their presumably riskier business models clearly suffered during the financial crisis in terms of access to financial markets, leading to a reduction in capital investments.
- Covered in: Think Tank Review - Issue 55/2018, EU Council Library. [Link]
External Financing Constraints and Firm’s Innovative Activities During the Financial Crisis (with Kornelius Kraft), ZEW Discussion Paper No. 17-064, 2017, Mannheim. (New, revised version available upon request)
The Impact of the Financial Crisis on Investments in Innovative Firms (with Kornelius Kraft), ZEW Discussion Paper No. 15-069, 2015, Mannheim. (New, revised version available upon request)
Work in progress
- Well-being and technology
- Impact of technology on employees
- Firm Management and innovation
- ICT and innovation