TY - CONF
T1 - Bank market power and incentives for firm creation in innovative industries
AU - Core, Fabrizio
PY - 2020
Y1 - 2020
N2 - I examine the role of banking competition for transmission of incentives to stimulate the creation of innovative firms. Exploiting the 2012 Start-Up Italy Act, designed to foster the creation of innovative firms through public bank guarantees, I document that the policy increased the creation of innovative firms by 24% between 2012 and 2015, but the policy's effect is halved in provinces where banking competition is weaker. This leads to fewer venture capital deals, less guaranteed lending, and lower leverage for these firms, resulting in higher entrepreneurial migration. I conclude that bank market power is detrimental to innovative firm creation.
AB - I examine the role of banking competition for transmission of incentives to stimulate the creation of innovative firms. Exploiting the 2012 Start-Up Italy Act, designed to foster the creation of innovative firms through public bank guarantees, I document that the policy increased the creation of innovative firms by 24% between 2012 and 2015, but the policy's effect is halved in provinces where banking competition is weaker. This leads to fewer venture capital deals, less guaranteed lending, and lower leverage for these firms, resulting in higher entrepreneurial migration. I conclude that bank market power is detrimental to innovative firm creation.
U2 - 10.2139/ssrn.3733765
DO - 10.2139/ssrn.3733765
M3 - Paper
ER -