Innovation externalities and the customer/supplier linkKeming Li Journal of Banking & Finance, 2018, vol. 86, issue C, 101-112 Abstract: This paper proposes a novel channel through which innovation externalities can affect firm performance. I find cross-sectional evidence that the positive innovation outputs of customer firms increase their supplier profitability as measured by firm ROE. This result is robust to the inclusion of industry fixed effect, a control for both supplier and customer characteristics, such as ROE, advertisement expenditure, capital expenditure, firm age, industry concentration, institutional ownership, dividend yield, and a control for industry spillover or geographical spillover. To identify the causal effect of customer innovation outputs on supplier performance, I study an exogenous shock—State Street Bank and Trust Company v. Signature Financial Group, Inc.—and find that an increase in granted customer patents causes an improvement in future supplier performance. This effect is mainly driven by the demand channel and the knowledge diffusion channel from customers to suppliers. Keywords: Innovation; Patent; Spillover; Customer/supplier link (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:jbfina:v:86:y:2018:i:c:p:101-112 DOI: 10.1016/j.jbankfin.2017.09.003 Access Statistics for this article Journal of Banking & Finance is currently edited by Ike Mathur More articles in Journal of Banking & Finance from Elsevier |
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