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

• Published in: Research policy 2022-12, Vol.51 (10), p.104566, Article 104566
• Main Authors: Clò, Stefano, Frigerio, Marco, Vandone, Daniela
• Format: Article
• Language: English
• Subjects: Development bank; Development financial institution; Equity deal; Financing innovation; State investment bank
• ISSN: 0048-7333; 1873-7625
• DOI: 10.1016/j.respol.2022.104566

We analyse the role of European development financial institutions (DFIs) in supporting innovation by empirically 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. •We explore the role of Development Financial Institutions in financing innovation.•EU DFIs effectively support innovation by participating in equity deals.•Patent activity of target firms increases more when at least one DFI is involved.•This contribution is amplified when DFIs act in partnership with other investors.