This paper studies whether and how banks’ technological innovations affect the bank lending channel of monetary policy transmission. We first provide a theoretical model in which banks’ technological innovation relaxes firms’ earning-based borrowing constraints and thereby enlarges the response of banks’ lending to monetary policy changes. To test the empirical implications, we construct a patent-based measurement of bank-level technological innovation, which can specify the nature of technology and tell whether it is related to the bank’s lending business. We find that lending-related innovations significantly strengthen the transmission of the bank lending channel.

In this paper, we examine the impact of female Chief Technology Officers (CTOs) on corporate innovation. We find that firms with female CTOs are more innovative (as captured by both patent counts and patent citations) than firms with male CTOs. This effect is more pronounced for firms with a stronger innovation-supportive culture, firms with female CEOs, and when female CTOs are more powerful. Using mediation analyses, we further validate that female CTOs’ transformational leadership style is a plausible mechanism through which they affect innovation positively.

My dissertation consists of three studies, all viewing aggregate productivity as driven by the individual decisions of firms and the inventors that work for them. I use microeconometric analysis to study why firms innovate and economic theory to link these decisions to macroeconomic outcomes. The first paper in this dissertation studies how German manufacturing firms adjust their productivity in response to an increase in competition from foreign markets. German firms only increase their productivity if their new competitors come from other industrialized economies. This productivity increase is not driven by innovation. Instead, firms cut input expenses and prices while maintaining their output. The second paper traces the matching decisions of firms and inventors on the labor markets of developed economies. It adapts empirical techniques used in labor economics to this special segment of the labor market and shows that assortative matching has been increasing from 1974 to 2012: High quality inventors go to high quality firms more often than was the case in previous decades. This cannot be explained by changes in the patent invention function: The productivity of a match between a firm and an inventor of constant quality remains roughly unchanged. The third paper develops an endogenous growth model with inventor labor markets and two types of innovation: disruptive inventions that change the underlying technology of firms’ products and incremental improvements over existing products. Firms acquire expertise in certain technologies by hiring the inventors who are experts in these fields. This gives them a strong incentive to prevent disruptive inventions: If the underlying technology changes, their investment in these inventors becomes worthless. Large firms inhibit aggregate growth by poaching inventors from firms engaged in disruptive innovation.

This paper investigates the propagation of technology news shocks within and across industrialised economies. We construct quarterly utilisation-adjusted total factor productivity (TFP) for thirteen OECD countries. Based on country-specific structural vector autoregressions (VARs), we document that (i) the identified technology news shocks induce a quite homogeneous response pattern of key macroeconomic variables in each country; and (ii) the identified technology news shock processes display a significant degree of correlation across several countries. Contrary to conventional wisdom, we find that the US are only one of many different sources of technological innovations diffusing across advanced economies. Technology news propagate through the endogenous reaction of monetary policy and via trade-related variables. That is, our results imply that financial markets and trade are key channels for the dissemination of technology.

This paper documents that "zombie" lending by undercapitalized banks distorts competition and impedes corporate innovation. This misallocation of capital prevents both the exit of zombie and entry of healthy firms in affected industries adversely impacting output and competition. Worse, capital misallocation depresses patent applications, particularly in high technology- and R&D-intensive sectors, and industries with neck- and-neck competition. We strengthen our results using an IV approach to address reverse causality and innovation survey data from the European Commission. Overall, our results are consistent with externalities imposed on healthy firms through the misallocation of capital.

The value of social network analysis is critically dependent on the comprehensive and reliable identification of actors and their relationships. We compare regional knowledge networks based on different types of data sources, namely, co-patents, co-publications, and publicly subsidized collaborative R&D projects. Moreover, by combining these three data sources, we construct a multilayer network that provides a comprehensive picture of intraregional interactions. By comparing the networks based on the data sources, we address the problems of coverage and selection bias. We observe that using only one data source leads to a severe underestimation of regional knowledge interactions, especially those of private sector firms and independent researchers.