Date of Award
5-2023
Document Type
Dissertation
Degree Name
Doctor of Philosophy (PhD)
Department
Economics
Committee Chair/Advisor
Santiago Caicedo
Committee Member
Cheng Chen
Committee Member
Aspen Gorry
Committee Member
Michal M. Jerzmanowski
Abstract
This paper examines the effects of credit constraints on aggregate innovation when firms face heterogeneous innovation costs and have differential access to credit. Better credit access affects aggregate innovation through (i) a direct effect by facilitating firms to innovate, (ii) a market share effect by encouraging low-cost firms to expand, and (iii) a value effect that increases competition and deteriorates high-cost firms’ innovation. We first develop a structural model featuring the above three channels. We then contrast this theory with the Chinese firm-level data documenting that Chinese state-owned enterprises are less constrained but face higher innovation costs than their private counterparts. We find that relaxing credit constraints promotes firms’ innovation and encourages private enterprises’ expansion. Guided by the reduced-form findings, we estimate the model and show that better credit access only improves aggregate innovation on a small magnitude. The value effect counteracts the direct andmarket share effect, attenuating the net effect on aggregate innovation.
Recommended Citation
Li, Jun, "Credit Constraints and Innovation" (2023). All Dissertations. 3306.
https://tigerprints.clemson.edu/all_dissertations/3306