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Firm financial soundness and knowledge externalities: A comparative regional analysis

Author

Listed:
  • Abdel Fattah, Lara
  • Arcuri, Giuseppe
  • Garsaa, Aziza
  • Levratto, Nadine

Abstract

This paper investigates the role of the regional context with regard to the influence of human capital and knowledge spillovers on SMEs' financial soundness. Our empirical setting is based on a multilevel analysis of panel data, which allows superior treatment of hierarchical data. The analysis is applied to SMEs belonging to the manufacturing sector and operating in four European countries over the period 2010–2015. We find that a combination of individual and regional†level characteristics explains firm soundness better than individual features alone. Furthermore, we find that a high local educational level and knowledge spillovers improve firm soundness and that their effects vary according to the regional level of knowledge. These results are confirmed by several robustness tests.

Suggested Citation

Handle: RePEc:eee:paresc:v:99:y:2020:i:5:p:1459-1487
DOI: 10.1111/pirs.12539
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JEL classification:

  • I25 - Health, Education, and Welfare - - Education - - - Education and Economic Development
  • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
  • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes
  • C33 - Mathematical and Quantitative Methods - - Multiple or Simultaneous Equation Models; Multiple Variables - - - Models with Panel Data; Spatio-temporal Models

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