Product Innovation and Credit Market Disruptions

Abstract

We provide new evidence that disruptions in firms’ access to credit during the Global Financial Crisis had significant effects on product innovation in the consumer-goods sector. We combine highly-granular retail-scan data with lending data and we find that credit-constrained firms introduced fewer new products, those products were less novel, and the new products sold less well. Overall, these findings suggest that disruptions to credit markets impair firms’ ability to compete for profits through new-product offerings.