Access to finance for innovative SMEs since the financial crisis

Lee, Neil ORCID: 0000-0002-4138-7163, Sameen, Hiba and Cowling, Marc (2015) Access to finance for innovative SMEs since the financial crisis. Research Policy, 44 (2). pp. 370-380. ISSN 0048-7333

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Abstract

In the wake of the 2008 financial crisis, there has been increased focus on access to finance for small and medium sized firms. Some evidence 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. First, we find evidence of a structural problem which restricts access to finance for innovative firms. Second, we show a cyclical problem has been caused by the financial crisis and impacted relatively more severely on non-innovative firms.

Item Type:	Article
Official URL:	http://www.journals.elsevier.com/research-policy
Additional Information:	© 2015 Elsevier
Divisions:	Geography & Environment
Subjects:	H Social Sciences > HC Economic History and Conditions H Social Sciences > HD Industries. Land use. Labor H Social Sciences > HG Finance
JEL classification:	G - Financial Economics > G2 - Financial Institutions and Services > G21 - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages G - Financial Economics > G3 - Corporate Finance and Governance > G32 - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure L - Industrial Organization > L2 - Firm Objectives, Organization, and Behavior O - Economic Development, Technological Change, and Growth > O3 - Technological Change; Research and Development > O31 - Innovation and Invention: Processes and Incentives
Date Deposited:	04 Nov 2014 12:50
Last Modified:	24 Apr 2024 18:15
URI:	http://eprints.lse.ac.uk/id/eprint/60052

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