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The financing of small innovative firms: the Italian case

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  • Silvia Magri

Abstract

Small firms encounter difficulties in collecting external finance due 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 aims to shed light on special features in financial structures of small innovative firms, compared with firms of similar size that do not innovate. The evidence shows that small innovators rely less on financial debts and more on internal financial resources; no important differences appear for large firms. This is consistent with the view that information problems mainly affect small firms. Another finding is that small innovative firms show a lower investment sensitivity to cash flow than small non-innovative firms: it is likely that the high incidence of internal financial resources allows them more flexibility in deciding their investments. No difference in investment sensitivity to cash flow, by innovative attitude, is found for large firms.

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Bibliographic Info

Article provided by Taylor & Francis Journals in its journal Economics of Innovation and New Technology.

Volume (Year): 18 (2009)
Issue (Month): 2 ()
Pages: 181-204

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Handle: RePEc:taf:ecinnt:v:18:y:2009:i:2:p:181-204

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Keywords: corporate finance; innovative firms; investment dynamics;

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Cited by:
  1. Giannetti, C., 2009. "Relationship Lending and Firm Innovativeness," Discussion Paper, Tilburg University, Center for Economic Research 2009-08, Tilburg University, Center for Economic Research.
  2. Eleonora Bartoloni, 2013. "Capital structure and innovation: causality and determinants," Empirica, Springer, Springer, vol. 40(1), pages 111-151, February.
  3. Filipe Silva & Carlos Carreira, 2012. "Do financial constraints threat the innovation process? Evidence from Portuguese firms," Economics of Innovation and New Technology, Taylor & Francis Journals, Taylor & Francis Journals, vol. 21(8), pages 701-736, November.
  4. Antonelli, Cristiano & Scellato, Giuseppe, 2014. "Firms Size and Directed Technological Change," Department of Economics and Statistics Cognetti de Martiis. Working Papers, University of Turin 201417, University of Turin.
  5. Antonelli, Cristiano & Colombelli, Alessandra, 2009. "The Generation and Exploitation of Technological Change: Market Value and Total Factor Productivity," Department of Economics and Statistics Cognetti de Martiis LEI & BRICK - Laboratory of Economics of Innovation "Franco Momigliano", Bureau of Research in Innovation, Complexity and Knowledge, Collegio 200912, University of Turin.
  6. Gerlach, Petra & O'Connell, Brian & O'Toole, Conor, 2013. "SME Credit Constraints and Macroeconomic Effects," Papers, Economic and Social Research Institute (ESRI) WP467, Economic and Social Research Institute (ESRI).
  7. Segarra Blasco, Agustí, 1958- & Teruel, Mercedes, 2010. "Are small firms more sensitive to financial variables?," Working Papers, Universitat Rovira i Virgili, Department of Economics 2072/151623, Universitat Rovira i Virgili, Department of Economics.
  8. Matteo Bugamelli & Luigi Cannari & Francesca Lotti & Silvia Magri, 2012. "The innovation gap of Italy’s production system: roots and possible solutions," Questioni di Economia e Finanza (Occasional Papers), Bank of Italy, Economic Research and International Relations Area 121, Bank of Italy, Economic Research and International Relations Area.
  9. A. Arrighetti & A. Ninni, 2009. "Firm size and growth opportunities: a survey," Economics Department Working Papers, Department of Economics, Parma University (Italy) 2009-EP05, Department of Economics, Parma University (Italy).
  10. Enrico Beretta & Silvia Del Prete, 2013. "Banking consolidation and bank-firm credit relationships: the role of geographical features and relationship characteristics," Temi di discussione (Economic working papers), Bank of Italy, Economic Research and International Relations Area 901, Bank of Italy, Economic Research and International Relations Area.

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