Working Paper: CEPR ID: DP13663
Authors: Cagatay Bircan; Ralph De Haas
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 thatexport 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: firm innovation; technological change; institutions; russia; credit constraints
JEL Codes: D22; F63; G21; O12; O31
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| firms' usage of bank credit (G21) | enhanced adoption of new products and technologies (O36) |
| firms located near historical R&D centers or railway networks (R32) | likelihood to innovate (O35) |
| firms engaging in innovation activities (O31) | higher total factor productivity (TFP) (O49) |
| firms engaging in innovation activities (O31) | labor productivity growth (O49) |
| historical density of bank branches (N11) | total factor productivity (TFP) (D24) |
| historical density of bank branches (N11) | labor productivity growth (O49) |
| historical presence of bank branches (N22) | current branch density (Y80) |
| historical density of bank branches (N11) | innovation likelihood (O36) |
| current branch density (Y80) | firms' usage of bank credit (G21) |
| current branch density (Y80) | innovation likelihood (O36) |