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Do R&D subsidies affect SME's: access to external financing

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Author Info
Meuleman, M.
De Maeseneire, W. (Vlerick Leuven Gent Management School)

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Abstract

Many countries spend sizeable sums of public money on R&D grants to alleviate debt and equity gaps for small firms’ innovation projects. In making such awards, knowledgeable government officials may certify firms to private financiers. This paper investigates whether government subsidies to R&D enhance SMEs’ access to external financing due to this certification effect. Using a unique Belgian dataset of 1107 approved requests and a control group of 501 denied requests for a specific type of R&D grant, we examine the impact on small firms’ external equity, short term and long term debt financing. We find that obtaining a R&D subsidy provides a positive signal about SME quality and results in better access to long-term debt.

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Paper provided by Vlerick Leuven Gent Management School in its series Vlerick Leuven Gent Management School Working Paper Series with number 2008-12.

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Length: 43 pages
Date of creation: 10 Sep 2008
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Handle: RePEc:vlg:vlgwps:2008-12

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