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The purpose of this paper is to investigate the potential link between Sweden’s high reliance on equity capital financing among small and medium-sized enterprises (SMEs) and its recognition as the most innovative economy in Europe according to the European Innovation Scoreboard (EIS). This paper examines the idea that the high levels of trust within Swedish society can explain why private equity financing is more prevalent among Swedish SMEs.

To test these ideas, the authors use data from the Survey on Access to Finance for Enterprises to measure the private equity reliance of firms. The authors also use the EIS to measure the innovation capacity of nations and various aspects of SMEs’ innovation activities. Finally, societal levels of trust are measured through the World Value Survey.

First, the authors find that European countries with a higher proportion of SMEs relying on equity financing tend to be ranked as more innovative by the EIS. Second, the authors find that the correlation between a nation’s share of SMEs relying on equity financing and their level of innovation activities is marginally stronger for product innovations than for business process innovations. Third, the authors find that countries with higher levels of trust tend to have higher equity capital reliance among SMEs.

This study builds upon previous research on equity capital and SMEs’ innovation activity while introducing new insights into the relationship between societal trust and equity financing.

The purpose of this paper is to compare the effects of equity financing and debt financing on technological innovation, and prove that the enhancement of a financing system’s risk tolerance for technological innovation can enhance the innovation risk preference of enterprises and thus promote innovation.

This study is based on a transnational sample of 35 developed countries from 1996 to 2015, by using the panel econometric model to empirically examine the effects of two financing modes on innovation.

The findings showed that equity financing, which has higher risk tolerance, has a more positive impact on innovation than debt financing in terms of both economic uptrend and economic downtrend, and that government efficiency plays a significant role in supporting the performance of technological innovation.

The paper provides a research framework for examining how a financing system’s risk tolerance capacity affects the development of technological innovation through promoting risk preference among enterprises. This paper provides transnational and cross-cycle comparative evidence that equity financing with a strong risk tolerance capacity can better support technological innovation, even in periods of economic downtrend. Moreover, the importance of financing system’s risk tolerance capacity for innovation during economic crises is discussed.

The purpose of this paper is to provide a better understanding of the determinants of small and medium-sized enterprises (SME) financing constraints and their impacts on investments in innovation. To explicate these factors, the authors use a general definition of innovation, distinguishing between product and process innovations, and highlight the role played by banking relationships.

On the basis of a literature review covering works specializing in innovation, financing constraints, and SME characteristics, a quantitative study is carried out in Spain, using a sample composed by 267 Spanish SMEs. Information was gathered by applying surveys addressed to the firm managers.

The findings reveal that financing constraints hinder innovation among Spanish SMEs functioning in hostile environments, though long-term banking relationships can moderate these financing constraints. The longer the duration of a firm’s banking relationship, the fewer financing constraints it faces, because the relationship significantly reduces information asymmetry.

To reduce financing constraints on their innovation, SMEs should establish long relationships and low debt concentration with their main bank. The more banks a firm works with, the greater its financing constraints. The findings have managerial implications, not just for firms but also for government policymakers and providers of consulting services.

This paper provides an in-depth analysis of the factors that affect innovation, along with insights into which financing constraints limit innovation during a severe recession.

Este trabajo profundiza en los determinantes de las restricciones financieras en las PYMEs y su impacto en la inversion en innovación durante una época de crisis económica. Para explicar estos factores, se ha utilizado una definición general de innovación distinguiendo las innovaciones en productos y procesos, y considerando el papel desempeñado por las relaciones bancarias.

Sobre la base de la revisión de la literature donde se encuentran trabajos centrados en innovación, restricciones financieras y características en la PYME, llevamos a cabo un análisis cuantitativo en España usando una muestra de 267 empresas españolas. La información se recopila a través de una encuesta al gerente de la empresa.

Los resultados muestran que las restricciones financieras perjudican la innovación en las PYMEs que se encuentran en entornos hostiles, aunque es destacable que las relaciones bancarias de larga duración pueden atenuar estos efectos. Cuanto más sólida, en términos de tiempo, sea la relación con la entidad financiera principal, menores restricciones financieras tendrá la empresa puesto que esta relación disminuye significativamente los problemas de información asimétrica entre los agentes.

Para reducir los efectos perversos de las restricciones financieras sobre la innovación en la PYME, la empresa debería construir relaciones bancarias de larga duración y mantener una baja concentración de las deudas con el banco principal. Por otra parte, cuanto mayor es el número de bancos con el que la empresa trabaja mayores son las restricciones financieras a las que se enfrenta cuando se plantea inversions en innovación. Estos resultados tienen importantes implicaciones tanto para los empresarios, como para los agentes políticos dinamizadores de la economía y los consultores de empresas.

Este trabajo realiza un análisis en profundidad de los factores que afectan a la innovación en la PYME, junto con ideas sobre cómo las restricciones financieras están afectando a la innovación durante una crisis económica severa.

The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate.

The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models.

The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance. Equity finance and bank finance have shown a higher effect followed by internal finance, finance from non-bank financial institutions and trade credit finance on firms’ probability to innovate.

The management of innovative firms should reduce dependency on short-term and retained earning financing and increase the use of long-term instruments improve innovation performance.

A pending policy task for African leaders is to design and evaluate reforms to create a strong financial sector that willing to support the innovation process.

This study contributes to the existent literature on finance of innovation by examining how firms finance innovation activities in developing countries. This study provides evidence on how innovative firms exhibit financing patterns different from non-innovative ones from developing countries.

The purpose of this paper is to investigate the effect of financial constraints on innovation in developing countries. It also examines how the effect of financial constraints varies by sector and with main firm characteristics such as size and age.

The study utilizes matched firm-level data from two sources; the World Bank Enterprise Survey and the Innovation Follow-Up Survey. From 11 African countries, 4,720 firms have been included in the sample. A recursive bivariate probit model is used.

The result shows that financial constraints adversely affect a firm’s decision to engage in innovative activities and the likelihood to have product innovation and process innovation. The results point out that the extent of the adverse effect of financial constraints on innovation differs across the sectors, firm size and age groups. A firm’s innovation is also explained by firm size, R&D, cooperation/alliance, the human capital of the firm, staff training, public financial support and export. At last, the probability of encountering financial constraints is explained by firms’ ex ante financing structure, amount of collateral, accounting and auditing practices and group membership.

Managers should strengthen the internal and external financing capacity to reduce financing constraints and their adverse effect on innovation.

A pending policy task for African leaders is to design and evaluate reforms that reduce the adverse effects of financial constraints on innovation.

This study contributes to the existing literature on financing of innovation by examining how and to what extent financial constraints affect innovation across various sectors, size and age groups.

The literature documents a shortage in the supply of external funding to small- and medium-sized enterprises (SMEs) in general and to innovative SMEs in particular. This study separates cognitive from financial constraints on innovative SMEs’ growth opportunities. Using data gathered through in-depth interviews with the CEOs of 115 SMEs, we reveal that over and above a problem with supply, there exists a twofold problem on the demand side. Specifically, we document that there is a tendency for these companies to avoid approaching external funding sources, especially ones that gear their investments toward innovation. Our results reveal a cognitive bias (over-pessimism) affecting the entrepreneurs’ (lack of) demand for external financing over and above other firm-specific factors. CEO tenure — our proxy for human and social capital — is significantly lower (higher) in firms that did (did not) pursue external funding. This finding may provide some support for our hypothesis regarding the cognitive bias and over-pessimism of the more veteran CEOs who have had negative experiences regarding recruiting external resources. The impact of this entrepreneurial cognition is shown to be economically detrimental to the enterprise. Nevertheless, the negative effects are not limited to the micro level, but have implications at the macro level as well, due to under-realization of the potential for employment, productivity, and growth of the firms comprising the vast majority of the economy.

This study aims to explore the relationship between financing constraints and the innovation performance of Internet enterprises in the cross-border innovation cooperation network. The study also analyzes the moderating effect of the location of the cross-border innovation cooperation network.

The authors selected patent data, related transaction data and other data of A-share listed companies on Shanghai and Shenzhen stock exchanges from 2014 to 2019. The generalized moment estimation method of instrumental variables (IV-GMM) method was used to analyze the relationship between financing constraints and the innovation performance of Internet firms and the moderating effect of the cross-border innovation cooperation network location. The threshold value of the moderating effect of the network structure hole was calculated with the threshold model.

The empirical results show a significant inverted U-shaped relationship between financing constraints and the innovation performance in the cross-border innovation cooperation network of Internet enterprises. Network centrality positively moderates this relationship. There is a threshold for the adjustment effect of network-structural holes, and the adjustment intensity of structural holes changes before and after the threshold.

This study provides a new perspective for Internet firms in innovation cooperation networks to alleviate the negative impact of financing constraints on innovation performance. The inverted U-shaped relationship between financing constraints and the innovation performance of Internet enterprises is in two stages. The moderating range of network centrality and the structural hole besides the threshold of the moderating effect of a structural hole are detailed.

This paper examines how weak ties and strong ties in the supply chain network influence the financing performance of small and medium enterprises (SMEs) through the mediation of information sharing and innovation capability.

Questionnaires were administered to 208 financial managers responsible for supply chain finance in SMEs in China. Data analysis techniques used included multiple regression analysis and fuzzy-set qualitative comparative analysis.

The authors found that weak ties had a more substantial impact on the financing performance of SMEs than strong ties did. Information sharing and innovation capability played a mediating role between weak and strong ties and the financing performance of SMEs. In addition, information sharing and innovation capability complement each other and jointly influence the financing performance of SMEs.

SMEs are suggested to actively embed themselves in the supply chain network to increase financing opportunities and reduce financing costs. The authors also recommend SMEs to enhance the level of their information sharing in the supply chain network and take advantage of their network ties to access and adopt new technology from other organisations and conduct collaborative innovation with partner institutions.

The paper extends the authors’ understanding of supply chain finance by exploring the intrinsic mechanism of how various constructs (weak ties, strong ties, information sharing and innovation capability) in the supply chain network have an impact on the financing performance of SMEs. In particular, the authors explore the under-researched mediating effect of information sharing and innovation capability on the relationship between network ties and the financing performance of SMEs.

Successful innovation requires a significant financial commitment. Therefore, the purpose of this paper is to investigate the relation between internal and external financing and the degree of innovation in European firms.

An empirical investigation is carried out using a longitudinal data set including 146 large, quoted, European firms over ten years, resulting in 1,460 firm years.

The authors find that only firms in the energy sector will be more innovative when they are profitable. For the sectors of basic materials, manufacture and construction, services, financial and property services, and technology and telecommunications, profitability is negatively related to innovation. External financing in the form of debt reduces the focus on innovation in profitable firms.

The authors analyze the findings through the lens of evolutionary economics. The model is not valid for firms in the consumer-goods sector, which indicates a need for adapting the model to each sector. We conclude that the impact of profitability on innovation varies across sectors, with debt financing as a moderating factor.

To the best of authors’ knowledge, this is the first study that analyzes the internal and external financing and the degree of innovation in European firms on a longitudinal basis.

The expectations surrounding innovation as the principal mean by which firms gain a sustainable advantage while simultaneously alleviating social problems are tremendous. However, in the process of developing innovation, many small entrepreneurs, SMEs, as well as large firms struggle to access the necessary finances in order to further develop their innovative projects. The purpose of this paper is to underline some of the most recent tools and practices used to finance novelty.

This paper synthetizes some thoughts about the financing of novelty and proposes a research agenda based on trends highlighted in the recent literature.

This paper pinpoints recent advances in finance applied to the field of innovation. In particular, this paper highlights both promising developments as well as the need for more research in this area in order to untangle the links between creativity and financial support, the financing of innovation in developing countries, accounting and evaluation of ideas.

The importance of developing innovation and easing access to resources has societal implications. The development of education around finance and entrepreneurship, as well as improving literacy of citizens in these fields could yield a more open view on innovation and financial supports in the future.

Financing novelty, evaluating projects and facing uncertainty are among the most difficult decisions investors take. This paper combines many dimensions of innovation and finance to construct an overview of current and future practices within both domains.