April 2016

Banking Consolidation and Small Firm Financing for Research and Development

Andrew C. Chang


This paper examines the effect of increased market concentration of the banking industry caused by the Riegle-Neal Interstate Banking and Branching Efficiency Act (IBBEA) on the availability of finance for small firms engaged in research and development (R&D). I measure the financing decisions of these small firms using a balanced panel of Small Business Innovation Research (SBIR) applications. Using difference-in-differences, I find IBBEA decreased the supply of finance for small R&D firms. This effect is larger for late adopters of IBBEA, which tended to be states with stronger small banking sectors pre-IBBEA.

Accessible materials (.zip)

Keywords: Banking Deregulation, IBBEA, Interstate Bank Branching Deregulation, Market Concentration, Research and Development, Riegle-Neal, Small Business Innovation Research

DOI: http://dx.doi.org/10.17016/FEDS.2016.029

PDF: Full Paper

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Last Update: June 19, 2020