The Real Effects of Lending Relationships on Innovative Firms and Inventor Mobility

70 Pages Posted: 11 Jun 2012 Last revised: 23 May 2016

See all articles by Johan Hombert

Johan Hombert

HEC Paris - Finance Department

Adrien Matray

Princeton University

Date Written: May 2016

Abstract

We study whether relationship lending is conducive to the financing of innovation. Exploiting a negative shock to relationships, we show that it reduces the number of innovative firms, especially those that depend more on relationship lending such as small, young, and opaque firms. This credit supply shock leads to reallocation of inventors whereby young and promising inventors leave small firms and move out of geographical areas where lending relationships are hurt. Overall, our results suggest that credit markets affect both the level of innovation activity and the distribution of innovative human capital across the economy.

Keywords: Lending relationships, Soft information, Innovation, Inventors

JEL Classification: G21

Suggested Citation

Hombert, Johan and Matray, Adrien, The Real Effects of Lending Relationships on Innovative Firms and Inventor Mobility (May 2016). Available at SSRN: https://ssrn.com/abstract=2082403 or http://dx.doi.org/10.2139/ssrn.2082403

Johan Hombert

HEC Paris - Finance Department ( email )

1 rue de la Liberation
Jouy-en-Josas Cedex, 78351
France

Adrien Matray (Contact Author)

Princeton University ( email )

Bendheim Center for Finance
26 Prospect Avenue
Princeton, NJ 08540
United States

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