Irish SME Investment in Economic Recovery
James Carroll (),
Paul Mooney and
Conor O'Toole ()
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Paul Mooney: Central Bank of Ireland
Quarterly Bulletin Articles, 2016, 77-91
Following dramatic declines during the crisis, capital investment expenditure is increasing rapidly in Ireland. However, little is known about SME investment levels, the extent to which this is driven by improved economic conditions, and how their investment is financed. Using cross-sectional survey data, we find that the share of SMEs investing has increased steadily since 2012, and currently about a third of SMEs are investing in each six month period. Larger firms, exporters and innovators are more likely to invest. However, over the last three years, the share of smaller, domestically-focused enterprises investing has increased at a faster rate. We find a strong link between regional unemployment rates and SME investment. However, this relationship only holds for more domestically-orientated firms. As the unemployment rate has decreased, these findings provide some evidence to link macroeconomic improvements to the observed pick-up in investment activity of SMEs. Finally, we explore the funding mix for new SME investments. Internal funding/retained earnings account for the highest share, with bank financing and leasing together accounting for less than twenty per cent.
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