← Search

Review of Financial Studies Vol. 36 No. 11 2023

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

Tania Babina1; Asaf Bernstein2; Filippo Mezzanotti3

1 Columbia University, USA · 2 Leeds School of Business, University of Colorado at Boulder and NBER , USA · 3 Kellogg School of Management, Northwestern University , USA

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.

DOI
10.1093/rfs/hhad023
Volume
36
Issue
11
Pages
4271-4317
Language
en
Sources
bibtex:phds-export.bib crossref openalex

Cite