Access to finance for innovative SMEs since the financial crisis

By Neil Chueh-An Lee, Hiba Sameen, Marc Cowling. 2015

601 citations recorded by the source corpus.

In the wake of the 2008 financial crisis, there has been increased focus on access to finance for small firms. Research from before the crisis suggested that it was harder for innovative firms to access finance. Yet no research has considered the differential effect of the crisis on innovative firms. This paper addresses this gap using a dataset of over 10,000 UK SME employers. We find that innovative firms are more likely to be turned down for finance than other firms, and this worsened significantly in the crisis. However, regressions controlling for a host of firm characteristics show that the worsening in general credit conditions has been more pronounced for non-innovative firms with the exception of absolute credit rationing which still remains more severe for innovative firms. The results suggest that there are two issues in the financial system. The first is a structural problem which restricts access to finance for innovative firms. The second is a cyclical problem has been caused by the financial crisis and has impacted relatively more severely on non-innovative firms.

Subfields: Accounting, Economics and Econometrics, Management of Technology and Innovation

View Paper: https://www.semanticscholar.org/paper/b74dd40a51f0ff892f91dbcccb299ac2400feca1

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Citations in the corpus

Did you save some cash for a rainy COVID-19 day? The crisis and SMEs (2020, background): “cash balances, COVID-19, precautionary saving, risk, SMEs”
The cost of growth: small firms and the pricing of bank loans (2015, unknown): “Nonetheless, Lee et al. (2014) show that access to bank finance for innovative firms became more difficult after the financial crisis (based on 2007–2012 loan applications) and that these firms were more likely to be unable to secure debt financing from any bank.”
Toward a better understanding of crowdfunding, openness and the consequences for innovation (2017, background): “Crowdfunding has quickly evolved into a commonly used vehicle to help innovating entrepreneurs get products developed and is one of the ways that innovative, small organizations have been able to access capital since the financial crisis (Lee et al., 2015).”
The perceived impact of the Covid-19 epidemic: evidence from a sample of 4807 SMEs in Sichuan Province, China (2020, background): “ManySMEshave a lack ofworking capital in normal times (Lee et al., 2015; Psillaki & Eleftheriou, 2015).”
Innovation, SMEs and the liability of distance: the demand and supply of bank funding in UK peripheral regions (2016, methodology): “This is an important omission as research typically finds innovative firms to have more restricted access to credit than typical SMEs in the UK (Freel, 2007; Lee et al, 2015).”
Financial Resources for the Circular Economy: A Perspective from Businesses (2019, background): “The availability of financial resources and their potential restrictions are also included into the analysis as they could affect the investments on CE [70,71].”
Financial Constraints and Small and Medium Enterprises: A Review* (2020, background): “Concentrating on a UK panel of SMEs, Requena-Silvente (2005) examines the relationship between sunk costs and firm dynamics in the context of foreign market participation.”
Entrepreneurial uncertainty during the Covid-19 crisis: Mapping the temporal dynamics of entrepreneurial finance (2020, methodology): “Some of these studies have carefully explored how bank lending to SMEs was affected by the GFC using traditional methods such as government surveys, business databases and official GDP data (Lee et al., 2015; Cowling et al., 2018; Brown and Lee, 2019; Demirgüç-Kunt et al., 2020).”