External Financing Constraints and Firm Innovation

Marek Giebel, Kornelius Kraft

Research output: Contribution to journalJournal articleResearchpeer-review


We investigate the effect of individual banks affected by the recent financial crisis of 2008/2009 on the innovation activities of their business customers. Firms associated with a bank that relies strongly on the interbank market are more likely to be exposed to a credit supply shock during the financial crisis and therefore face external financing constraints. Exploiting both the extensive and the intensive margin, our difference‐in‐differences results imply that those firms which have a business relation to a bank with higher interbank market reliance reduce their innovation activities during the financial crisis to a higher degree than other firms. Tests for additional expenditures reveal that marketing expenditures show a lower or even no sensitivity to bank financing during the financial crisis.
Original languageEnglish
JournalThe Journal of Industrial Economics
Issue number1
Pages (from-to)91-126
Number of pages36
Publication statusPublished - Mar 2019
Externally publishedYes

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