Informed Finance and Technological Change: Evidence from Credit Relationships

48 Pages Posted: 4 May 2004

See all articles by Ana Maria Herrera

Ana Maria Herrera

University of Kentucky - Gatton College of Business and Economics

Raoul Minetti

Michigan State University - Department of Economics

Date Written: April 2004

Abstract

This paper empirically investigates the effect of "informed finance" on technological change. We argue that the theoretical literature offers conflicting predictions on whether the information of financiers fosters or impedes firms' innovation. Using data from a sample of Italian manufacturing firms, we find that the information of firms' main banks, proxied by the duration of credit relationships, fosters innovation. We also find some evidence that this positive effect is economically and statistically more significant for product than for process innovations. The latter result may signal that the alleged tight secrecy of process innovations exacerbates the negative effects of banks' information on innovation.

JEL Classification: G21, O30

Suggested Citation

Herrera, Ana Maria and Minetti, Raoul, Informed Finance and Technological Change: Evidence from Credit Relationships (April 2004). Available at SSRN: https://ssrn.com/abstract=539782 or http://dx.doi.org/10.2139/ssrn.539782

Ana Maria Herrera

University of Kentucky - Gatton College of Business and Economics ( email )

Lexington, KY 40506
United States

HOME PAGE: http://gatton.uky.edu/faculty/herrera

Raoul Minetti (Contact Author)

Michigan State University - Department of Economics ( email )

101 Marshall Hall
East Lansing, MI 48824
United States
517-355-7349 (Phone)
517-432-1068 (Fax)

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