Access to finance for innovative SMEs since the financial crisis

Neil Lee, Hiba Sameen and Marc Cowling

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: In the wake of the 2008 financial crisis, there has been increased focus on access to finance for small and medium sized firms. Some evidence from before the crisis suggested that it was harder for innovative firms to access finance. Yet no research has considered the differential effect of the crisis on innovative firms. This paper addresses this gap using a dataset of over 10,000 UK SME employers. We find that innovative firms are more likely to be turned down for finance than other firms, and this worsened significantly in the crisis. However, regressions controlling for a host of firm characteristics show that the worsening in general credit conditions has been more pronounced for non-innovative firms with the exception of absolute credit rationing which still remains more severe for innovative firms. The results suggest that there are two issues in the financial system. First, we find evidence of a structural problem which restricts access to finance for innovative firms. Second, we show a cyclical problem has been caused by the financial crisis and impacted relatively more severely on non-innovative firms.

Keywords: Finance; SME; Entrepreneurship; Recession; Innovation (search for similar items in EconPapers)
JEL-codes: G21 G32 L2 O31 (search for similar items in EconPapers)
Date: 2015-03
New Economics Papers: this item is included in nep-ban, nep-cfn, nep-ent, nep-ino and nep-sbm
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (208)

Published in Research Policy, March, 2015, 44(2), pp. 370-380. ISSN: 0048-7333

Downloads: (external link)
http://eprints.lse.ac.uk/60052/ Open access version. (application/pdf)

Related works:
Journal Article: Access to finance for innovative SMEs since the financial crisis (2015)
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:ehl:lserod:60052

Access Statistics for this paper

More papers in LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library LSE Library Portugal Street London, WC2A 2HD, U.K.. Contact information at EDIRC.
Bibliographic data for series maintained by LSERO Manager (lseresearchonline@lse.ac.uk).