Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression

81 Pages Posted: 28 Apr 2020 Last revised: 14 Oct 2022

See all articles by Tania Babina

Tania Babina

Columbia University - Columbia Business School, Finance

Asaf Bernstein

University of Colorado at Boulder; National Bureau of Economic Research (NBER)

Filippo Mezzanotti

Kellogg School of Management - Department of Finance

Multiple version iconThere are 2 versions of this paper

Date Written: October 2022

Abstract

We examine innovation following the Great Depression using data on a century’s worth of U.S. patents and a difference-in-differences design that exploits regional variation in the crisis severity. Harder-hit areas experienced large and persistent declines in independent patenting, mostly reflecting the disruption in access to finance during the crisis. This decline was larger for young and inexperienced inventors and lower-quality patents. In contrast, innovation by large firms increased, especially among young and inexperienced inventors. Overall, the Great Depression contributed to the decline in technological entrepreneurship and accelerated the shift of innovation into larger firms.

Keywords: Great Depression, Crises, Innovation, Independent Inventors, Technological Entrepreneurship, Startups, Firm Boundaries, Organization of Innovation

JEL Classification: G01, G21, O3, N12, N22, N32

Suggested Citation

Babina, Tania and Bernstein, Asaf and Mezzanotti, Filippo, Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression (October 2022). Available at SSRN: https://ssrn.com/abstract=3567425 or http://dx.doi.org/10.2139/ssrn.3567425

Tania Babina (Contact Author)

Columbia University - Columbia Business School, Finance ( email )

3022 Broadway
New York, NY 10027
United States

Asaf Bernstein

University of Colorado at Boulder ( email )

Campus Box 419
Boulder, CO 80309
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Filippo Mezzanotti

Kellogg School of Management - Department of Finance ( email )

Evanston, IL 60208
United States

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