The financing of small innovative firms: The Italian case

Silvia Magri ()

No 640, Temi di discussione (Economic working papers) from Bank of Italy, Economic Research and International Relations Area

Abstract: Small firms encounter difficulties in raising external finance owing to greater information problems. For small innovative firms, whose activity is more difficult to evaluate, the cost of external finance could be even higher. This paper examines special features of the financial structure of small innovative firms, compared with firms of similar size that do not innovate. The evidence shows that small innovators rely less on financial debt and more on internal financial resources; no important differences appear for large firms. This is consistent with the view that informational problems mainly affect small firms; large firms, even when they innovate, continue to rely on their traditional set of financial instruments. Another finding is that in small innovative firms investment is less sensitive to cash flow than in small non-innovative firms, probably because the high incidence of internal financial resources allows them more flexibility in deciding their investments. No comparable difference is found between innovative and non-innovative large firms.

Keywords: corporate finance; innovative firms; investment dynamics (search for similar items in EconPapers)
JEL-codes: D92 G32 O31 (search for similar items in EconPapers)
Date: 2007-09
New Economics Papers: this item is included in nep-ent and nep-ino
References: View complete reference list from CitEc
Citations: View citations in EconPapers (4)

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Related works:
Journal Article: The financing of small innovative firms: the Italian case (2009)
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Persistent link: https://EconPapers.repec.org/RePEc:bdi:wptemi:td_640_07

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