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  • Journal of Financial Economics

Did Bank Distress Stifle Innovation During the Great Depression?

By: Ramana Nanda and Tom Nicholas
  • Format:Print
  • | Pages:47
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Abstract

We find a negative relationship between bank distress and the level, quality, and trajectory of firm-level innovation during the Great Depression, particularly for R&D firms operating in capital intensive industries. However, we also show that because a sufficient number of R&D intensive firms were located in counties with lower levels of bank distress, or were operating in less capital intensive industries, the negative effects were mitigated in aggregate. Although Depression era bank distress was associated with the stifling of innovation, our results also help to explain why technological development was still robust following one of the largest shocks in the history of the U.S. banking system.

Keywords

Great Depression; R&D; Bank Distress; Patents; Research and Development; Financial Crisis; Banks and Banking; Innovation and Invention; Banking Industry; United States

Citation

Nanda, Ramana, and Tom Nicholas. "Did Bank Distress Stifle Innovation During the Great Depression?" Journal of Financial Economics 114, no. 2 (November 2014): 273–292.
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About The Authors

Ramana Nanda

Entrepreneurial Management
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Tom Nicholas

Entrepreneurial Management
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More from the Authors
  • Taxation and Innovation in the 20th Century By: Ufuk Akcigit, John Grigsby, Tom Nicholas and Stefanie Stantcheva
  • Chinese Restriction, Violence, and Exclusion in the United States By: Tom Nicholas, Boyang Han and Tomas Rosales
  • Investment Committee Voting and the Financing of Innovation By: Andrey Malenko, Ramana Nanda, Matthew Rhodes-Kropf and Savitar Sundaresan
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