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Product Innovation and Trade Credit Demand and Supply: Evidence from European Countries

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  • Nielen, Sebastian
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    Abstract

    This study addresses the relationship between product innovation and the demand and supply of trade credit. Theoretical as well as empirical studies are used to derive the hypothesis of a positive link between product innovation and trade credit demand and supply. Using a sample covering SMEs from 24 European countries this relationship is tested empirically. Basically the estimation results confirm that introducing a product innovation is positively related with demand and provision of trade credit for SMEs. Innovative firms have a higher probability to face credit constraints and therefore have a higher probability to demand for trade credit. On the other hand suppliers have an incentive to provide trade credit especially to innovative customers because they have an easier access to information about the growth potential of innovative SMEs compared to banks. --

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    Paper provided by Verein für Socialpolitik / German Economic Association in its series Annual Conference 2013 (Duesseldorf): Competition Policy and Regulation in a Global Economic Order with number 79997.

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    Date of creation: 2013
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    Handle: RePEc:zbw:vfsc13:79997

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    Web page: http://www.socialpolitik.org/
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    1. Thorsten Beck & Asli Demirgüç-Kunt & Vojislav Maksimovic, 2005. "Financial and Legal Constraints to Growth: Does Firm Size Matter?," Journal of Finance, American Finance Association, American Finance Association, vol. 60(1), pages 137-177, 02.
    2. Stiglitz, Joseph E & Weiss, Andrew, 1981. "Credit Rationing in Markets with Imperfect Information," American Economic Review, American Economic Association, American Economic Association, vol. 71(3), pages 393-410, June.
    3. Morris G. Danielson & Jonathan A. Scott, 2004. "Bank Loan Availability and Trade Credit Demand," The Financial Review, Eastern Finance Association, Eastern Finance Association, vol. 39(4), pages 579-600, November.
    4. Simona Mateut, 2005. "Trade Credit and Monetary Policy Transmission," Journal of Economic Surveys, Wiley Blackwell, Wiley Blackwell, vol. 19(4), pages 655-670, 09.
    5. Biais, Bruno & Gollier, Christian, 1997. "Trade Credit and Credit Rationing," Review of Financial Studies, Society for Financial Studies, Society for Financial Studies, vol. 10(4), pages 903-37.
    6. Nilsen, Jeffrey H, 2002. "Trade Credit and the Bank Lending Channel," Journal of Money, Credit and Banking, Blackwell Publishing, Blackwell Publishing, vol. 34(1), pages 226-53, February.
    7. Richard Pike & Nam Sang Cheng & Karen Cravens & Dawne Lamminmaki, 2005. "Trade Credit Terms: Asymmetric Information and Price Discrimination Evidence From Three Continents," Journal of Business Finance & Accounting, Wiley Blackwell, Wiley Blackwell, vol. 32(5-6), pages 1197-1236.
    8. Daisuke Tsuruta, 2008. "Bank information monopoly and trade credit: do only banks have information about small businesses?," Applied Economics, Taylor & Francis Journals, Taylor & Francis Journals, vol. 40(8), pages 981-996.
    9. Christina V. Atanasova & Nicholas Wilson, 2003. "Bank borrowing constraints and the demand for trade credit: evidence from panel data," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 24(6-7), pages 503-514.
    10. Schwartz, Robert A., 1974. "An Economic Model of Trade Credit," Journal of Financial and Quantitative Analysis, Cambridge University Press, Cambridge University Press, vol. 9(04), pages 643-657, September.
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