Introduction of Innovations during the 2007-8 Financial Crisis: The Role of Innovator Type
50 Pages Posted: 29 Apr 2014
Date Written: April 29, 2014
In this paper, we examine the changes in innovation by US companies, non-US companies, and US universities during the 2007-8 financial crisis. Our theoretical framework describes their different solutions to the informational and control problems associated with innovation funding, and how a financial crisis affects their ability to attract funding. We hypothesise that the change in the amount of innovation undertaken during the crisis will be negatively influenced by external funding requirements and innovation uncertainty for companies, but positively influenced by them for universities. Our examination of patenting in the US finds agreement with our theoretical predictions. We also find that for US companies the effect of external funding requirements becomes positive as time since the crisis increases. Counterfactuals investigate the effect of US companies retaining their innovation portfolios but responding to the crisis the same way as non-US companies or US universities, and vice versa. US company responses are associated with larger reductions in patenting.
Keywords: Innovation, patenting, economic crisis, financing constraint
JEL Classification: O31, G01
Suggested Citation: Suggested Citation