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The Financing and Technology Decisions of SMEs: I. Finance as a Determinant of Investment

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Author Info
Alexander Cobham

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Abstract

This paper surveys the theoretical and empirical literature on the financing of investment in order to lay the foundation for subsequent analysis of technology investments by Southern European SMEs. By adapting a variety of approaches to suit this purpose, a number of findings for policy are reached. In particular, it is found that support for highly successful SMEs is distinct from support for struggling SMEs, and that each has different implications for innovation and employment. Furthermore, policy to encourage banking efficiency and policy to stimulate venture capital investment are seen as competing ways forward, with potentially very different results for SMEs' technology investment. The most significant suggestion of this paper, however, is that finance may determine not just the level but also the nature of technology investment.

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File URL: http://www3.qeh.ox.ac.uk/RePEc/qeh/qehwps/qehwps24.pdf
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Paper provided by Queen Elizabeth House, University of Oxford in its series QEH Working Papers with number qehwps24.

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Handle: RePEc:qeh:qehwps:qehwps24

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Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Brouwer, Maria & Hendrix, Bart, 1998. " Two Worlds of Venture Capital: What Happened to U.S. and Dutch Early Stage Investment?," Small Business Economics, Springer, vol. 10(4), pages 333-48, June. [Downloadable!] (restricted)
  2. Prowse, Stephen, 1998. "Angel investors and the market for angel investments," Journal of Banking & Finance, Elsevier, vol. 22(6-8), pages 785-792, August. [Downloadable!] (restricted)
  3. Sharpe, Steven A, 1990. " Asymmetric Information, Bank Lending, and Implicit Contracts: A Stylized Model of Customer Relationships," Journal of Finance, American Finance Association, vol. 45(4), pages 1069-87, September. [Downloadable!] (restricted)
    Other versions:
  4. Ward Brown, 1997. "R&D Intensity and Finance: Are Innovative Firms Financially Constrained?," FMG Discussion Papers dp271, Financial Markets Group. [Downloadable!] (restricted)
  5. Steven Ongena & David C. Smith, 1997. "Empirical Evidence on the Duration of Bank Relationships," Finance 9703002, EconWPA. [Downloadable!]
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  6. Jonathan Eaton & Eva Gutierrez & Samuel Kortum, 1998. "European Technology Policy," Boston University - Institute for Economic Development 87, Boston University, Institute for Economic Development.
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  7. Masahiko Aoki & Serdar Dinc, 1997. "Relational Financing as an Institution and its Viability under Competition," Working Papers 97011, Stanford University, Department of Economics. [Downloadable!]
  8. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, vol. 71(3), pages 393-410, June. [Downloadable!] (restricted)
  9. Tether, B. S., 1998. "Small and large firms: sources of unequal innovations?," Research Policy, Elsevier, vol. 27(7), pages 725-745, November. [Downloadable!] (restricted)
  10. Boot, Arnoud W A & Thakor, Anjan V, 1994. "Moral Hazard and Secured Lending in an Infinitely Repeated Credit Market Game," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 35(4), pages 899-920, November. [Downloadable!] (restricted)
  11. Samuel Kortum & Josh Lerner, 1998. "Does Venture Capital Spur Innovation?," NBER Working Papers 6846, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
  12. Bornheim, Stefan P & Herbeck, Thomas H, 1998. " A Research Note on the Theory of SME-Bank Relationships," Small Business Economics, Springer, vol. 10(4), pages 327-31, June. [Downloadable!] (restricted)
  13. Robert E. Carpenter & Steven M. Fazzari & Bruce C. Petersen, 1995. "Three Financing Constraint Hypotheses and Inventory Investment: New Tests With Time and Sectoral Heterogeneity," Macroeconomics 9510001, EconWPA, revised 09 Oct 1995. [Downloadable!]
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Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Bartzokas, Anthony, 2001. "Financial Markets and Technological Change: Patterns of Technological and Financial Decisions by Manufacturing Firms in Southern Europe," Discussion Papers 4, United Nations University, Institute for New Technologies. [Downloadable!]
  2. Pasquale Lucio Scandizzo, 2004. "Financing Technology: An Assessment of Theory and Practice," CEIS Research Paper 43, Tor Vergata University, CEIS. [Downloadable!]
  3. Alexander Cobham, . "Making Bad Decisions: firm size and investment under uncertainty," QEH Working Papers qehwps39, Queen Elizabeth House, University of Oxford. [Downloadable!]
  4. Alexander Cobham, . "The Financing and Technology Decisions of SMEs: II. Technology and Policy," QEH Working Papers qehwps25, Queen Elizabeth House, University of Oxford. [Downloadable!]
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