Booming house prices: friend or foe of innovative firms?

Using threshold and quantile regression methods, this paper explores the nonlinear relationship between housing prices and corporate innovation. In our sample, we find that a single threshold exists when the growth rate of housing prices is at 2.82%, above which the negative impact of housing prices on corporate innovation significantly increases. Results from the quantile regression further suggest that corporate innovation suffers from a stronger negative effect of surging housing prices when firms are at a lower level of innovation. Therefore, policymakers designing innovation policy should consider that housing price beyond certain levels is a nonnegligible obstacle to corporate innovative activity, especially for firms with insufficient enthusiasm for innovation.