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Are Small Innovators Credit Rationed?

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  • Mark Freel

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Abstract

Drawing upon a sample of 256 small firms who applied for bank loans, the current paper is concerned with the extent to which ‘innovativeness’ is associated with a lower level of loan application success. The paper records the proportion of loan successfully applied for and estimates a series of tobit models utilising a number of proxy measures for innovation (in terms of inputs, outputs, and commercial significance to the firm) and incorporating standard controls. In general, the models suggest (as anticipated) that the most innovative firms are less successful in loan markets than their less innovative peers – though there is some variation by proxy. Moreover, there is tentative evidence that ‘a little innovation may be a good thing’. Copyright Springer 2007

Suggested Citation

  • Mark Freel, 2007. "Are Small Innovators Credit Rationed?," Small Business Economics, Springer, vol. 28(1), pages 23-35, January.
  • Handle: RePEc:kap:sbusec:v:28:y:2007:i:1:p:23-35
    DOI: 10.1007/s11187-005-6058-6
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    References listed on IDEAS

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    1. Stewart C. Myers & Nicholas S. Majluf, 1984. "Corporate Financing and Investment Decisions When Firms Have InformationThat Investors Do Not Have," NBER Working Papers 1396, National Bureau of Economic Research, Inc.
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