Impact of Technology Finance on Technological Innovation of Technology-Based Small and Medium-Sized Enterprises in Thailand

Technology finance, including venture capital, government grants, and R&D bank credit, significantly boosts technological innovation in knowledge-intensive small and medium-sized enterprises (SMEs), as demonstrated in a study of Thai firms. This study examines three objectives- (1) testing whether technology finance positively impacts innovation output; (2) examining whether financing constraints mediate this relationship; and (3) probing heterogeneity across firm size, age, and sub-sector. Using a panel dataset of 2,847 firm-year observations across five technology sub-sectors and mediation analysis, the research finds that technology finance directly improves patent applications and new product revenue, with a one-standard-deviation increase associated with an 18-22% rise in patents and a 14-17% rise in new product revenue. This effect is partly mediated by easing financing constraints (measured via the Size-Age index), meaning technology finance works both by providing capital and by reducing financial barriers to R&D, with the indirect pathway accounting for approximately 38-44% of the total effect. The impact is strongest for younger, smaller, and high-tech firms, particularly in digital technology and advanced manufacturing. The study addresses fragmented empirical evidence in emerging ASEAN economies and contributes to the middle-income trap literature, demonstrating that alleviating financial bottlenecks is a key mechanism for enabling the innovation-led structural transformation necessary for Thailand to escape growth stagnation. These findings offer actionable guidance for SME owners, finance managers, and policymakers in designing Thailand’s technology finance ecosystem under the Thailand 4.0 agenda.