Do Large Banks Reward More Innovative Small Enterprises?

In this paper we provide further evidence on the importance of the small business segment for large and internationalized banks. Indeed, we concentrate on the financing of small Italian businesses by a large, international bank which has also developed tailored products and services for its retail customers, with a special emphasis on the link between innovation activity and credit merit. The role of the bank in fostering firm innovation activity is analyzed, for instance, by Herrera and Minetti (2007), whose empirical investigation shows that informational tightness – measured by the duration of the credit relationship between the customer and its main bank – has a positive effect on the probability of the enterprise to innovate.