Bridging the finance gap for small firms. The role of information flows across large firm-based production networks in supplying finance to small firms: the case of France

Bob Hancké and Sylvie Cieply

No FS I 96-311, Discussion Papers, Research Unit: Economic Change and Employment from WZB Berlin Social Science Center

Abstract: This paper discusses finance problems of small firms. Since small firms and banks belong to different economic worlds, as a result of which information assymetries emerge, credit rationing leads to sub-optimal financing arrangements. The paper analyses institutional solutions to these information assymetries between banks andsmall firms and argues that, as a result of the political-economic development ofFrance since the Second World War, production networks around large firms have become the institutional solution for the finance problems of small firms. These intricate links allow for multi-layered information, which can be meaningfully understood by both, to flow smoothly between large and small firms. The paper concludes by raising the relevance of this particular solution for similar problems in other countries.

Date: 1996
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