Bank specialization and explorative innovation: evidence from technology branches in China

We examine whether and to what extent bank organizational specialization affects firm innovation by exploiting the staggered establishment of technology branches across Chinese cities from 2011 to 2024. We find that following the establishment of technology branches, firms produce more patents in previously unexplored technological fields and allocate a larger share of their patent portfolios to these fields. The effect operates primarily through lower financing costs, improved access to tailored credit products, and stronger information-processing and screening capabilities within banks. Our findings suggest that bank organizational specialization facilitates firms’ engagement in explorative innovation.