Innovation and SME finance: Evidence from developing countries

Nirosha Hewa Wellalage; Viviana Fernandez

doi:10.1016/j.irfa.2019.06.009

Innovation and SME finance: Evidence from developing countries

Nirosha Hewa Wellalage
, Viviana Fernandez

Business School

Research output: Contribution to journal › Article › peer-review

143 Scopus citations

Abstract

This paper explores the relationship between firm-level innovation and external finance for small and medium enterprises (SMEs). Our sample consists of 13,430 firms from Eastern Europe and Central Asian countries. A propensity score matching approach reports a positive relationship between formal finance and product and process innovation, which is greater for early-stage SMEs than for mature counterparts. However, informal finance has more significant impact on mature firms' product innovation. Our empirical evidence highlights policy implications for countries desiring to enhance the innovation of their SMEs by improving the external finance of these SMEs.

Original language	English
Article number	101370
Journal	International Review of Financial Analysis
Volume	66
DOIs	https://doi.org/10.1016/j.irfa.2019.06.009
State	Published - Nov 2019

Keywords

Developing countries
External finance
Innovation
Propensity score matching methods
SMEs

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10.1016/j.irfa.2019.06.009

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title = "Innovation and SME finance: Evidence from developing countries",

abstract = "This paper explores the relationship between firm-level innovation and external finance for small and medium enterprises (SMEs). Our sample consists of 13,430 firms from Eastern Europe and Central Asian countries. A propensity score matching approach reports a positive relationship between formal finance and product and process innovation, which is greater for early-stage SMEs than for mature counterparts. However, informal finance has more significant impact on mature firms' product innovation. Our empirical evidence highlights policy implications for countries desiring to enhance the innovation of their SMEs by improving the external finance of these SMEs.",

keywords = "Developing countries, External finance, Innovation, Propensity score matching methods, SMEs",

author = "Wellalage, \{Nirosha Hewa\} and Viviana Fernandez",

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AU - Fernandez, Viviana

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AB - This paper explores the relationship between firm-level innovation and external finance for small and medium enterprises (SMEs). Our sample consists of 13,430 firms from Eastern Europe and Central Asian countries. A propensity score matching approach reports a positive relationship between formal finance and product and process innovation, which is greater for early-stage SMEs than for mature counterparts. However, informal finance has more significant impact on mature firms' product innovation. Our empirical evidence highlights policy implications for countries desiring to enhance the innovation of their SMEs by improving the external finance of these SMEs.

KW - Developing countries

KW - External finance

KW - Innovation

KW - Propensity score matching methods

KW - SMEs

UR - https://www.scopus.com/pages/publications/85068579650

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DO - 10.1016/j.irfa.2019.06.009

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VL - 66

JO - International Review of Financial Analysis

JF - International Review of Financial Analysis

M1 - 101370

ER -

Innovation and SME finance: Evidence from developing countries

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Keywords

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