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Nurturing regional innovation: the effects of bank competition in the USA

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Listed:
  • Lin Tian
  • Liang Han

Abstract

Whilst corporate innovation is one of the key drivers of regional economic growth, question remains over how regional corporate activities are affected by local banking market structure. By attaching regional corporate innovation activities to a market power hypothesis, this paper examines: 1) if regional innovation activities would benefit from the improved banking market competition; 2) the variation of banking market competition effects on innovation outputs over unique regional characteristics, such as state-level R%D intensity and distribution of innovation activities. Using patent and citation data and local bank data from 51 states in the USA between 1992 and 2004, we show that improved local banking market competition increases both the quantity (patents) and quality (citations) of regional innovation outputs. It is also found that such a favourable effect on regional innovation is especially stronger for those states with low R%D intensity and those with more concentrated innovation activities.

Suggested Citation

  • Lin Tian & Liang Han, 2021. "Nurturing regional innovation: the effects of bank competition in the USA," International Journal of Banking, Accounting and Finance, Inderscience Enterprises Ltd, vol. 12(1), pages 75-96.
    • Handle: RePEc:ids:injbaf:v:12:y:2021:i:1:p:75-96
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