Credit Resource Availability and Innovation Output: Evidence from Chinese Industrial Enterprises

Abstract This paper investigates the effect of credit availability on the number of industrial enterprises' patents from the perspective of financial geography, using the number of bank branches in the vicinity of industrial enterprises in China as a proxy variable. The number of patents is a proxy for the innovation output of an enterprise. The study finds that the higher availability of credit resources, represented by the number of bank branches in the vicinity, inhibits the innovation output of enterprises, and this inhibitory effect is more obvious in state-owned enterprises and large enterprises. Higher availability of credit resources leads industrial firms to fall more easily into the resource curse trap and thus fail to gain more innovative capabilities. This paper also provides a theoretical and data base for China's inability to complete industrial upgrading; it provides new evidence for the phenomenon of insufficient innovation capacity of industrial enterprises under China's rapid economic development in recent years; and it also provides a policy reference for financial supply reform. Keywords: Availability of credit resources, Innovation output, Financial geography.