How local is local? Evidence from bank competition and corporate innovation in U.S.

This paper aims to fill in a research gap in the effects of bank competition on corporate innovation. In addition to the evidence on the favorable effects of bank competition on corporate innovation, we show novel evidence on the substitution effects of bank competition in a wider region and neighbor-state to local bank competition in financing corporate innovation activities. In banking market, we show ‘how local is local’ depends on the operating scope and information transparency of firms. Local banks have an information advantage over distant banks in financing local businesses and informationally opaque corporate innovation activities