We analyse the role of European development financial institutions (DFIs) in supporting innovation by empiri- cally investigating the impact of their participation as investors in equity deals on target firms' patenting activity. We build a unique international data set of deals and firm-level data in the years 2007–2019. Econometric results highlight the positive contribution of DFIs in mobilizing finance to support innovation, and the magnitude of this effect is amplified when DFIs act in partnership with other investors. This represents novel evidence on the innovative-oriented mission driving their activity. These new findings point to the recent role of DFIs in sharing the management of EU financial instruments, implementing programmes to strengthen the longer-term support of finance for enterprises, and boosting innovation and growth. 1. Introduction Development financial institutions (DFIs) – i.e. government- invested legal entities with an explicit policy mandate to carry out development or promotional activities1 – have traditionally been part of the economic policy toolkit and the financial market landscape in Europe, playing a relevant role in mitigating market failures (De Aghion, 1999; Diamond, 1957). The 2008 crisis has further strength- ened their function, since the European Commission and EU Member States have defined a common framework where the European In- vestment Bank and several national DFIs, also called national promo- tional banks, are sharing the management of EU financial instruments and implementing programmes to strengthen the longer-term avail- ability of finance for enterprises and boost growth (European Com- * Corresponding author. E-mail addresses: stefano.clo@unifi.it (S. Cl`o), marco.frigerio@unisi.it (M. Frigerio), daniela.vandone@unimi.it (D. Vandone). 1 Definitions of development financial institutions, also referred to as development banks, state investment banks, promotional banks, include: ‘public sector or government-invested legal entities with an explicit policy mandate to promote the socio-economic goals in a region, sector or specific market segment’ (De Luna- Martinez and Vicente, 2012), ‘institutions to promote and finance enterprise in the private sector’ (Diamond, 1957); ‘government-sponsored financial institutions concerned primarily with the provision of long-term capital to industry’ (De Aghion, 1999); ‘financial institutions that are primarily concerned with offering long- term capital finance to projects that are deemed to generate positive externalities and hence would be underfinanced by private creditors’ (Yeyati et al., 2004); ‘legal entities carrying out financial activities on a professional basis which are given a mandate by a member state or a member state's entity at central, regional or local level, to carry out development or promotional activities’ (European Commission, 2015). Contents lists available at ScienceDirect Research Policy journal homepage: www.elsevier.com/locate/respol https://doi.org/10.1016/j.respol.2022.104566 Received 23 April 2021; Received in revised form 12 May 2022; Accepted 24 May 2022

Financial support to innovation: The role of European development financial institutions / Stefano Clò. - In: RESEARCH POLICY. - ISSN 0048-7333. - ELETTRONICO. - 51:(2022), pp. 1-22.

Financial support to innovation: The role of European development financial institutions

Stefano Clò
2022

Abstract

We analyse the role of European development financial institutions (DFIs) in supporting innovation by empiri- cally investigating the impact of their participation as investors in equity deals on target firms' patenting activity. We build a unique international data set of deals and firm-level data in the years 2007–2019. Econometric results highlight the positive contribution of DFIs in mobilizing finance to support innovation, and the magnitude of this effect is amplified when DFIs act in partnership with other investors. This represents novel evidence on the innovative-oriented mission driving their activity. These new findings point to the recent role of DFIs in sharing the management of EU financial instruments, implementing programmes to strengthen the longer-term support of finance for enterprises, and boosting innovation and growth. 1. Introduction Development financial institutions (DFIs) – i.e. government- invested legal entities with an explicit policy mandate to carry out development or promotional activities1 – have traditionally been part of the economic policy toolkit and the financial market landscape in Europe, playing a relevant role in mitigating market failures (De Aghion, 1999; Diamond, 1957). The 2008 crisis has further strength- ened their function, since the European Commission and EU Member States have defined a common framework where the European In- vestment Bank and several national DFIs, also called national promo- tional banks, are sharing the management of EU financial instruments and implementing programmes to strengthen the longer-term avail- ability of finance for enterprises and boost growth (European Com- * Corresponding author. E-mail addresses: stefano.clo@unifi.it (S. Cl`o), marco.frigerio@unisi.it (M. Frigerio), daniela.vandone@unimi.it (D. Vandone). 1 Definitions of development financial institutions, also referred to as development banks, state investment banks, promotional banks, include: ‘public sector or government-invested legal entities with an explicit policy mandate to promote the socio-economic goals in a region, sector or specific market segment’ (De Luna- Martinez and Vicente, 2012), ‘institutions to promote and finance enterprise in the private sector’ (Diamond, 1957); ‘government-sponsored financial institutions concerned primarily with the provision of long-term capital to industry’ (De Aghion, 1999); ‘financial institutions that are primarily concerned with offering long- term capital finance to projects that are deemed to generate positive externalities and hence would be underfinanced by private creditors’ (Yeyati et al., 2004); ‘legal entities carrying out financial activities on a professional basis which are given a mandate by a member state or a member state's entity at central, regional or local level, to carry out development or promotional activities’ (European Commission, 2015). Contents lists available at ScienceDirect Research Policy journal homepage: www.elsevier.com/locate/respol https://doi.org/10.1016/j.respol.2022.104566 Received 23 April 2021; Received in revised form 12 May 2022; Accepted 24 May 2022
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Utilizza questo identificativo per citare o creare un link a questo documento: https://hdl.handle.net/2158/1281265
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