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Relationship lending and innovation: empirical evidence on a sample of European firms

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  • Stefania Cosci
  • Valentina Meliciani
  • Valentina Sabato

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 and 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.

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  • Stefania Cosci & Valentina Meliciani & Valentina Sabato, 2016. "Relationship lending and innovation: empirical evidence on a sample of European firms," Economics of Innovation and New Technology, Taylor & Francis Journals, vol. 25(4), pages 335-357, June.
    • Handle: RePEc:taf:ecinnt:v:25:y:2016:i:4:p:335-357
    DOI: 10.1080/10438599.2015.1062098
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    10. Yan Yu & Yi-Tsung Lee, 2022. "Do Inquiry Letters Curb Corporate Catering Motives of High Sustainable R&D Investment? Empirical Evidence from China," Sustainability, MDPI, vol. 14(12), pages 1-17, June.
    11. Cristian Barra & Nazzareno Ruggiero, 2022. "Firm innovation and local bank efficiency in Italy: Does the type of bank matter?," Annals of Public and Cooperative Economics, Wiley Blackwell, vol. 93(4), pages 1083-1128, December.
    12. Ferri, Giovanni & Murro, Pierluigi & Pini, Marco, 2020. "Credit rationing and the relationship between family businesses and banks in Italy," Global Finance Journal, Elsevier, vol. 43(C).
    13. Canh Phuc Nguyen & Thanh Dinh Su, 2021. "Financing the economy: The multidimensional influences of financial development on economic complexity," Journal of International Development, John Wiley & Sons, Ltd., vol. 33(4), pages 644-684, May.
    14. Friedemann Polzin & Helen Toxopeus & Erik Stam, 2018. "The wisdom of the crowd in funding: information heterogeneity and social networks of crowdfunders," Small Business Economics, Springer, vol. 50(2), pages 251-273, February.
    15. Zachary Bethune & Guillaume Rocheteau & Tsz-Nga Wong & Cathy Zhang, 2022. "Lending Relationships and Optimal Monetary Policy," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 89(4), pages 1833-1872.
    16. Agostino, Mariarosaria & Errico, Lucia & Rondinella, Sandro & Trivieri, Francesco, 2023. "Enduring lending relationships and european firms default," Research in Economics, Elsevier, vol. 77(4), pages 459-477.
    17. Cosci, Stefania & Mirra, Loredana & Terzo, Giuseppe, 2023. "Small banks and innovative entrepreneurial culture in Italy: A historical perspective," Economics Letters, Elsevier, vol. 230(C).
    18. Wang, Jiaxin & Chen, Jin & Huang, Xiang & Song, Zilong, 2023. "Principal SOE customers and corporate tax avoidance: Evidence from the government arrears clearance reform," Energy Economics, Elsevier, vol. 128(C).
    19. Pankaj C. Patel & John A. Pearce II, 2020. "Franchisees and Loan Default on Third-Party Guarantee Loans: Evidence From the United States," Entrepreneurship Theory and Practice, , vol. 44(5), pages 861-877, September.
    20. Yin, Lei & Du, Shanxing & Chen, Ge, 2024. "The influence of the bank–firm relationship on enterprises’ technological innovation efficiency: Evidence from China," International Review of Economics & Finance, Elsevier, vol. 89(PA), pages 1583-1600.
    21. Murro, Pierluigi & Peruzzi, Valentina, 2019. "Family firms and access to credit. Is family ownership beneficial?," Journal of Banking & Finance, Elsevier, vol. 101(C), pages 173-187.

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