Financing Innovation in Europe: The Impact of Financial Resources on Patented Innovations
Abstract: This analysis empirically investigates the question whether increases in financial resources translate into qualitatively better innovation on a firm-level. In a quasi-experimental setup, we utilize staggered and country-specic implementation dates of legislative changes in the case of European nancial market harmonization during the 2000s as an exogenous shift affecting firms' financing. Based on bibliographic, procedural and legal patent information, we are able to construct novel, multi-dimensional measures of innovation both in quantitative and qualitative terms. Our findings support the conventional view that more nance leads to more innovation in quantitative terms. However, these findings do not hold regarding innovative quality. Instead, we find no or even negative effects on multiple dimensions of patent quality. Overall, our results provide a new perspective on the relationship of financial resources as a crucial factor of innovation.