The Value of Business Networks; an Analysis of Firm Financing in Transition Economies

Oluwarotimi Owolabi () and Sarmistha Pal

CEDI Discussion Paper Series from Centre for Economic Development and Institutions(CEDI), Brunel University

Abstract: The paper argues that the networked firms have an advantage in securing bank finance in countries with weak legal and judicial institutions. An analysis of recent BEEPS data from sixteen CEE transition countries lends some support to this hypothesis. Firms affiliated to business associations are more likely to have bank finance while small and medium firms are less likely to secure it. Importance of being associated with business networks is particularly evident among firms who borrow from foreign banks, as the latter attempt to hedge risk in an uncertain environment. Significance of business networking however vanishes if institutional quality improves.

Pages: 40 pages
Date: 2009-01
New Economics Papers: this item is included in nep-tra
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