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Geographical Organization of Banking Systems and Innovation Diffusion

  • Pietro Alessandrini
  • Andrea F. Presbitero
  • Alberto Zazzaro
Chapter

Abstract

The empirical literature is largely supportive of the importance of financial constraints and identifies local banking development and relationship lending as possible determinants of firms’ propensity to innovate. In this chapter, we argue that the spatial organization of banking systems and the distance of local branches from banks’ decisional centers are major factors influencing the effectiveness in collecting and processing soft information on local innovative firms. We provide evidence showing that, while branch density and the length of credit relationships have a positive causal effect on innovation when considered singularly, after controlling for the functional distance between the banking system and the local economy they lose statistical significance in favor of the latter. In this perspective, our results suggest that the geographical organization of banks and the spatial distribution of their headquarters represent key variables for local development.

Keywords

Banking System Product Innovation Soft Information Bank Relationship Innovation Adoption 
These keywords were added by machine and not by the authors. This process is experimental and the keywords may be updated as the learning algorithm improves.

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Copyright information

© Springer Science+Business Media, LLC 2009

Authors and Affiliations

  • Pietro Alessandrini
    • 1
  • Andrea F. Presbitero
    • 2
  • Alberto Zazzaro
    • 3
  1. 1.Dipartimento di EconomiaUniversità Politecnica delle MarcheItaly
  2. 2.Depertment of the World Bank on debt issues and has been a visitor at CEP.Universitá Politecnica delle Marche in Ancona and a member of the Money and Finance Research group.Marche
  3. 3.Università Politecnica delle Marche in Ancona, a member of the Money and Finance Research group, and a research associate with CFEPSR (Portici, Italy)Italy

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