Does IT Help? Information Technology in Banking and Entrepreneurship

Author/Editor:

Toni Ahnert ; Sebastian Doerr ; Nicola Pierri ; Yannick Timmer

Publication Date:

August 6, 2021

Electronic Access:

Free Download. Use the free Adobe Acrobat Reader to view this PDF file

Disclaimer: IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.

Summary:

This paper analyzes the importance of information technology (IT) in banking for entrepreneurship. To guide our empirical analysis, we build a parsimonious model of bank screening and lending that predicts that IT in banking can spur entrepreneurship by making it easier for startups to borrow against collateral. We provide empirical evidence that job creation by young firms is stronger in US counties that are more exposed to ITintensive banks. Consistent with a strengthened collateral lending channel for IT banks, entrepreneurship increases more in IT-exposed counties when house prices rise. In line with the model's implications, IT in banking increases startup activity without diminishing startup quality and it also weakens the importance of geographical distance between borrowers and lenders. These results suggest that banks' IT adoption can increase dynamism and productivity.

Series:

Working Paper No. 2021/214

Frequency:

regular

English

Publication Date:

August 6, 2021

ISBN/ISSN:

9781513591803/1018-5941

Stock No:

WPIEA2021214

Pages:

57

Please address any questions about this title to publications@imf.org