The Limits of Lending? Banks and Technology Adoption Across Russia

Abstract

We exploit historically-determined variation in local credit markets to identify the impact of bank lending on firm innovation across Russia. We find that deeper credit markets increase firms' use of bank credit, their adoption of new products and technologies, and productivity growth. This relationship is more pronounced in industries further from the technological frontier; more exposed to import competition; and that export more. These impacts are also stronger for firms near historical R&D centers or railways, and in regions with supportive institutions. Consistent with these results, credit markets contribute to economic growth in such regions.

Keywords: credit constraints, Firm innovation, institutions, Russia, Technological change

JEL Classification: D22, F63, G21, O12, O31