We use a unique World Bank survey of 1,088 private manufacturing firms from 18 Chinese cities over the period 2000 to 2002 to empirically examine the roles of managerial incentives and CEO characteristics in a firm's innovation activities. We look at both innovation effort (R&D intensity) and...

We show that there is a U-shaped relationship between bank loan spread and borrower innovation activity, which indicates a ceiling for bank profit from lending to innovative firms. Experienced banks can benefit from lending to innovation-competitive firms by achieving lower covenant violation...