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


Review of Financial Studies

July 2017, vol. 30, n°7, pp.2413–2445

Departments: Finance, GREGHEC (CNRS)

Keywords: Lending relationships, Soft information, Innovation, Inventors

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 econom