Does Access to Finance and Investment Climate Enhance Small and Medium Enterprises (SMEs) Innovation in India?

Ruchi Gupta and Bhanu Pratap Singh ()
Additional contact information
Ruchi Gupta: Banaras Hindu University
Bhanu Pratap Singh: Banaras Hindu University

SN Operations Research Forum, 2024, vol. 5, issue 4, 1-29

Abstract: Abstract Innovation is a tool by which a firm can enhance, compete, and sustain in a dynamic world. Innovative firms are engines of total factor productivity and economic growth. However, financially constrained enterprises are less innovative in comparison to unconstrained firms in developing countries. The major aim of the study is to investigate the effects of access to finance and the investment climate condition on the innovation of SMEs in India using firm-level data on 6385 firms from the World Bank Enterprise Survey (WBES), 2022. The study employs two-stage least square-instrument variable (2SLS-IV) approach to examine the relationship. Post-estimation tests such as Cragg–Donald F-statistic and Stock and Yogo are applied to check the model’s strength and validity. In addition, the Sargan and Basmann test is applied to test for overidentification in the model. The study’s major findings suggest that long-term finance promotes innovation whereas investment climate condition such as bribes adversely affects it. Hence, in addition to expanding access to long-term finance, emphasis should be given on investment climate such as containing bribes while framing policies to promote innovation and support SMEs in India.

Keywords: Innovation; Access to finance; Investment climate; Two-stage least square method (2SLS); SMEs (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://link.springer.com/10.1007/s43069-024-00381-1 Abstract (text/html)
Access to the full text of the articles in this series is restricted.

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:spr:snopef:v:5:y:2024:i:4:d:10.1007_s43069-024-00381-1

Ordering information: This journal article can be ordered from
https://www.springer.com/journal/43069

DOI: 10.1007/s43069-024-00381-1

Access Statistics for this article

SN Operations Research Forum is currently edited by Marco Lübbecke

More articles in SN Operations Research Forum from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().