NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH

Did Bank Distress Stifle Innovation During the Great Depression?

Ramana Nanda, Tom Nicholas

NBER Working Paper No. 20392
Issued in August 2014
NBER Program(s):   CF   PR

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.

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Document Object Identifier (DOI): 10.3386/w20392

Published: Nanda, Ramana & Nicholas, Tom, 2014. "Did bank distress stifle innovation during the Great Depression?," Journal of Financial Economics, Elsevier, vol. 114(2), pages 273-292. citation courtesy of

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