Search results

The purpose of this paper is to examine the effect of the financial structure on innovation.

We utilize the matched firm-level data from two sources: the World Bank Enterprise Survey and the Innovation Follow-Up Survey. A total of 3,664 firms from 11 African countries are included.

The authors find a financially constrained and low technology-intensive firm that uses internal finance more than its peers is less likely to innovate. Our results also show that a firm that uses new equity and debt finance more than its peers is more likely to innovate. The results particularly suggest the significant effect of bank and trade credit finance on firms’ innovation. The extent and, in some cases, the direction of the effect of dependence on internal finance, new equity finance and debt finance on innovation vary due to the heterogeneity in firm size, age and ownership status. Corporate innovation is also associated with firm size, R&D, cooperation, staff training, public support, exportation and group membership.

The management of companies, particularly financially constrained firms, should reduce their dependence on internal finance, which negatively affects their innovation. As a remedy, they could improve their reliance on new equity finance and debt finance, especially bank finance and trade credit finance, which positively affect their innovativeness.

A pending policy task for African business leaders is to design and evaluate reforms that help create strong financial sectors willing to provide capital to a broad range of firms, particularly small and young firms.

This study adds new evidence to the recent surge of debate on the trade-off between going public, using debt or heavily using internal sources to finance innovative projects, and which of these is more important in promoting firm-level innovation.

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.

This paper aims to explore the impact of green finance on the heterogeneity of enterprise green technology innovation and the underlying mechanism between them.

Using the data of China's A-share listed enterprises from 2008 to 2020 and the fixed effect model, the authors empirically explore the relationship and mechanism between green finance and green technology innovation by constructing the green finance index while considering both the quality and quantity of innovation.

The study suggests that green finance is positively related to the quality and quantity of enterprise green technology innovation, while green finance is more effective in stimulating the quality of green technology innovation than quantity. In addition, alleviating financial mismatch and improving the quality of environmental information disclosure are core mechanisms during the process of green finance facilitating green technology innovation. Furthermore, green finance exerts a more positive effect on the quality and quantity of green technology innovation with large-size enterprises, heavily polluting industries and enterprises in the eastern region.

This paper enriches the literature on green finance and green technology innovation and provides practical significance for green finance implementation.

Research on financing for entrepreneurship has consolidated over the last decade. However, one question remains unanswered: how does the combination of external finance, such as equity and debt capital, and internal finance, such as working capital, affect the likelihood of grant funding over time? The purpose of this study is to analyse the relationship between different sources of financing and firms' ability to fundraise via innovation grants and to examine the role of female chief executive officer (CEO) in this relationship. Unlike equity and debt funding, innovation grants manifest a form of innovation acknowledgement and visibility, recognition of potential commercialization of inovation.

The authors use firm-level financial data for 3,034 high-growth firms observed in 2015, 2017 and 2019 across 35 emerging sectors in the United Kingdom (UK) to test the factors affecting the propensity of high-growth firms to secure an innovation grant as a main source of fundraising for innovation during the early stages of product commercialization.

The results do not confirm gender bias for innovation fundraising in new industries. This contrasts with prior research in the field which has demonstrated that access to finance is gender-biased. However, the role of CEO gender is important as it moderates the relationship between the sources of funding and the likelihood of accessing the grant funding.

This study does not analyse psychological or neurological factors that could determine the intrinsic qualities of male and female CEOs when making high-risk decisions under conditions of uncertainty related to innovation. Direct gender bias with regards to access to innovation grants could not be assumed. This study offers important policy implications and explains how firms in new industries can increase their likelihood of accessing a grant and how CEO gender can moderate the relationship between availability of internal and external funding and securing a new grant.

This study implicates and empirically demonstrates that gender bias does not apply in fundraising for innovation in new industries. As female CEOs represent various firms in different sectors, this may be an important signal for investors in new product development and innovation policies targeting gender bias and inclusion.

The authors draw on female entrepreneurship and feminist literature to demonstrate how various sources of financing and gender change the likelihood of grant funding in both the short and long run. This is the first empirical study which aims to explain how various internal and external sources of finance change the propensity of securing an innovation grant in new industries.

The purpose of this paper is to investigate how access to financing for incremental as well as radical innovation activities is affected by firm-specific structural and behavioral characteristics.

Deploying a two-stage Heckman probit model on survey data spanning the period 2000–2013 and covering 1,169 firms, this paper analyzes the effect of a firm’s engagement in incremental and radical innovation on its likelihood to get constrained in their access to external finance, and how this effect is moderated by the firm’s age and size.

In line with earlier research, it is confirmed that the type of innovation matters for the access to external finance, but in a more nuanced way than generally portrayed. While incremental innovation activities have little negative effect on the access to external finance, radical innovation activities tend to be penalized by capital markets. This effect appears to be particularly strong for small firms.

This paper provides nuanced insights into the interplay between types of firm-level innovation activities, structural characteristic and access to external finance.

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.

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 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.