Financial Disruptions and the Organization of Innovation: Evidence from the Great Depression

Tania Babina, Asaf Bernstein, Filippo Mezzanotti*

*Corresponding author for this work

Research output: Contribution to journalArticlepeer-review

4 Scopus citations

Abstract

We examine innovation following the Great Depression using data on a century's worth of U.S. patents and a difference-in-differences design that exploits regional variation in the crisis severity. Harder-hit areas experienced large and persistent declines in independent patenting, mostly reflecting the disruption in access to finance during the crisis. This decline was larger for young and inexperienced inventors and lower-quality patents. In contrast, innovation by large firms increased, especially among young and inexperienced inventors. Overall, the Great Depression contributed to the decline in technological entrepreneurship and accelerated the shift of innovation into larger firms.

Original languageEnglish (US)
Pages (from-to)4271-4317
Number of pages47
JournalReview of Financial Studies
Volume36
Issue number11
DOIs
StatePublished - Nov 1 2023

ASJC Scopus subject areas

  • Accounting
  • Finance
  • Economics and Econometrics

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