Economics at your fingertips  

Lack of access to external finance and SME labor productivity: does project quality matter?

Victor Motta ()
Additional contact information
Victor Motta: Getulio Vargas Foundation

Small Business Economics, 2020, vol. 54, issue 1, No 6, 119-134

Abstract: Abstract Small and medium-sized enterprises (SMEs) are the main engine of local economic development. However, SME growth remains an issue as labor productivity is low in emerging economies. Due to information asymmetries, constraints in access to external finance prevent a larger participation in the economy, hindering SMEs from expanding their business operations. In the absence of collateral requirements, small and medium-sized firms may rely on exporting activities to signal lenders project quality since this may indicate that firms have good projects to invest. The main purpose of this study was to investigate the impact of project quality on both SME labor productivity and on the relationship between lack of adequate access to external finance and labor productivity. Our results indicate a positive relationship between project quality and labor productivity. We also found that SMEs that applied for bank loans but were rejected have lower levels of labor productivity than SMEs that obtained financing. In addition, constrained SMEs that export internationally were found to have higher labor productivity than constrained firms with lower access to export markets, although the role of project quality in explaining labor productivity for constrained SMEs may be due to direct export sales in most part.

Keywords: Project quality; Sales exports; Access to capital; Labor productivity; SMEs (search for similar items in EconPapers)
JEL-codes: G20 L25 L26 M21 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link) Abstract (text/html)
Access to full text is restricted to subscribers.

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:

Ordering information: This journal article can be ordered from
http://www.springer. ... 29/journal/11187/PS2

DOI: 10.1007/s11187-018-0082-9

Access Statistics for this article

Small Business Economics is currently edited by Zoltan J. Acs and David B. Audretsch

More articles in Small Business Economics from Springer
Bibliographic data for series maintained by Sonal Shukla () and Springer Nature Abstracting and Indexing ().

Page updated 2022-05-12
Handle: RePEc:kap:sbusec:v:54:y:2020:i:1:d:10.1007_s11187-018-0082-9