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Financial constraints and innovation capacities of small and medium enterprises in period of crisis

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  • Patrick Sergio NZUGUEM KOUAM

  • Aurel Merlin LATI KINMENE

  • Simplice Gaël TONMO

  • Laurent NDJANYOU

Abstract

Objective: Innovation is seen as a real growth driver for almost all small and medium-sized enterprises (SMEs) worldwide. However, they are faced with severe financial constraints, which reduces their capacity to innovate. In this context, the aim of this paper is to analyze the effect of financial constraints on the innovative capacity of SMEs in times of crisis. \n Method: To achieve this, we use data collected via a Cameroonian bank during the year 2021, on a final sample of 138 SMEs operating in Cameroon. In terms of statistical tools, we used flat sorting to describe the qualitative variables in the study, and Principal Component Analysis (PCA) to calculate the synthetic index of the impact of the COVID-19 pandemic. Logistic regressions were used to study the relationship between financial constraints and the innovative capacity of SMEs in times of crisis. \n Results: The results show that financial constraints have a negative impact on the input (R&D expenditure) and output (product innovation) innovation capacity of Cameroonian SMEs. Moreover, the crisis has a positive impact on input innovation capacity and a negative impact on output innovation. \n Originality/Relevance: Although the relationship between financial constraints and innovation has been highlighted in the literature, the fact remains that no studies have been carried out in a crisis context, and more specifically in Cameroon. The results of this empirical work lead to nuanced and sometimes contradictory conclusions. Our study should contribute to the debate on the relationship between financial constraints and innovation in companies. \n Social/management contribution: The results of this study will enable SME managers to strengthen their internal and external financing capacities to reduce financial constraints and their negative effects on innovation in times of crisis. In social terms, it will enable business leaders to design and evaluate reforms that reduce the negative effects of financial constraints on innovation, such as a policy aimed at strengthening the willingness of financial sectors to finance investment in innovation.

Suggested Citation

  • Patrick Sergio NZUGUEM KOUAM & Aurel Merlin LATI KINMENE & Simplice Gaël TONMO & Laurent NDJANYOU, 2023. "Financial constraints and innovation capacities of small and medium enterprises in period of crisis," Journal of Academic Finance, RED research unit, university of Gabes, Tunisia, vol. 14(2), pages 142-161, December.
    • Handle: RePEc:jaf:journl:v:14:y:2023:i:2:n:664
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    JEL classification:

    • M1 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration
    • N8 - Economic History - - Micro-Business History
    • G3 - Financial Economics - - Corporate Finance and Governance

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