Financing Innovation in Europe

Project Start:11/2017
Researchers:David Heller, Jan Krzyzanowski, Uwe Walz
Category: Financial Intermediation
Funded by:European Patent Office (EPO)

The project examined the relation between firm financing conditions and invention activities. The project output contains a Policy Paper, a Data Report, and two Working Papers.

The Policy Paper “Financial Integration, Financing Constraints, and Innovation in Europe: Is more better?” analyzes how innovations are financed and how changes in the availability of funding affect the type and amount of inventions firms introduce to the market. The paper should identify whether there is a causal link to the availability of more financial resources and inventive outcomes. Further, we tried to shed light on the potentially different effects of more financial resources on the quantity as well as the quality of inventions.

We examined the effects of financial integration and the loosened financial constraints in the European Union (EU) on firm inventive activities using recent literature and the European patent office (EPO) data. We looked into the effects of the strengthening of Pan-European financial constraints in the course of an exercise of the European Banking Authority (EBA) and its consequences for several dimensions of firms’ patenting activities.

Further, the project includes the Data Report “Patent Measures from the Patstat Database – Descriptive Data Analysis and Code Report”. We did a detailed time series analysis on patent measures derived from the Patstat database from multiple perspectives, including evolvements over different technological sectors, firm sizes, and countries.

In the Working Paper “Patented Inventions in Europe – The Impact of Financial Resources on Firms’ Patented Inventions” we analyzed the impact of decreases in available financial resources on various dimensions of patented firm-level inventions. We used the European Capital exercise by the European Banking Authority (EBA) as a quasi-experimental setup as it required a subset of European banks to increase their capital ratios and thereby reduced the availability of their financial resources to the financing needs of firms.

In the paper “The Impact of Financial Resources on Corporate Inventions: Quasi-Natural Experimental Evidence from Financial Market Integration” we analyzed the impact of financial resources on firm-level patenting. The study used the European Commission’s effort to harmonize financial markets, the so-called Financial Service Action Plan (FSAP), as an exogenous shift improving firms’ access to funding. We analyzed whether and how affected firms adjust their patenting activities in terms of several value-relevant characteristics.