Template-Type: ReDIF-Paper 1.0
Author-Name: Stefania Cosci 
Author-X-Name-First: Stefania
Author-X-Name-Last: Cosci
Author-Email: s.cosci@lumsa.it
Author-Workplace-Name: LUMSA University 
Author-Name: Valentina Meliciani 
Author-X-Name-First: Valentina 
Author-X-Name-Last: Meliciani
Author-Email: vmeliciani@unite.it.
Author-Workplace-Name: University of Teramo
Author-Name: Valentina Sabato
Author-X-Name-First: Valentina 
Author-X-Name-Last: Sabato
Author-Email: v.sabato@lumsa.it
Author-Workplace-Name: LUMSA University
Title: RELATIONSHIP LENDING AND INNOVATION: EMPIRICAL EVIDENCE ON A SAMPLE OF EUROPEAN FIRMS

Abstract: This paper investigates the impact of relationship lending on innovation (the probability to innovate and the intensity of innovation). Using a unique dataset providing detailed information on bank-firm relationships across European firms, we relate different proxies of relationship lending (soft information, long-lasting relationships, number of banks, share of the main bank) to innovation. We find a very strong and robust positive effect of ‘soft-information intensive’ relationships, a less robust positive effect of long-lasting relationships and a negative effect of credit concentration as measured by the number of banking relationships. We also find that ‘soft-information intensive’ relationships reduce credit rationing for innovative firms, while long-lasting relationships seem to favour innovation via other relational channels. These results raise some concern on the impact of screening processes based on automatic procedures, as those suggested by the Basel rules, on firms’ capability to finance innovative activities in Europe.

Length: 36 pages
Creation-Date: 2015-03
Publication-Status: 
File-URL: https://repec.lumsa.it/wp/wpC04.pdf
File-Format: Application/pdf
Number: wpC04
Classification-JEL: G10; G21; G30; O30; O31
Keywords: relationship lending; innovation; R&D; credit constraints; soft information
Handle: RePEc:lsa:wpaper:wpC04