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The demand and supply of external finance for innovative firms

Author

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  • Andrea Mina
  • Henry Lahr
  • Alan Hughes

Abstract

Access to finance has figured prominently in the debate on barriers to firm growth, even though existing empirical research has not found conclusive evidence of a "finance gap." Moreover, it is not clear to what extent innovation aggravates financial constraints and what role innovation inputs, processes and outputs play in the market for external capital. In this article, we analyze how firm-level innovation affects (i) the likelihood of seeking external finance and (ii) the likelihood of obtaining it. We analyze an original data set of 3095 UK and US firms (small and medium size enterprises and middle-market) containing information on firms' innovation behaviors, performance, and finances for the period 2002--2004. Controlling for firm-specific characteristics, we provide novel and extensive evidence on the links between innovation, in its input, process and output dimensions, and the demand for external capital and its supply. Copyright 2013 The Author 2013. Published by Oxford University Press on behalf of Associazione ICC., Oxford University Press.

Suggested Citation

  • Andrea Mina & Henry Lahr & Alan Hughes, 2013. "The demand and supply of external finance for innovative firms," Industrial and Corporate Change, Oxford University Press, vol. 22(4), pages 869-901, August.
  • Handle: RePEc:oup:indcch:v:22:y:2013:i:4:p:869-901
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    File URL: http://hdl.handle.net/10.1093/icc/dtt020
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    Citations

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    Cited by:

    1. García-Quevedo, José & Segarra-Blasco, Agustí & Teruel, Mercedes, 2018. "Financial constraints and the failure of innovation projects," Technological Forecasting and Social Change, Elsevier, vol. 127(C), pages 127-140.
    2. repec:spr:fininn:v:3:y:2017:i:1:d:10.1186_s40854-017-0076-7 is not listed on IDEAS
    3. Kobil Ruziev & Don Webber, 2017. "SMEs access to formal finance in post-communist economies: Do institutional structure and political connectedness matter?," Working Papers 20171701, Department of Accounting, Economics and Finance, Bristol Business School, University of the West of England, Bristol.
    4. repec:eee:tefoso:v:127:y:2018:i:c:p:166-176 is not listed on IDEAS
    5. Lee, Neil & Sameen, Hiba & Cowling, Marc, 2015. "Access to finance for innovative SMEs since the financial crisis," Research Policy, Elsevier, vol. 44(2), pages 370-380.
    6. Dorothea Schäfer & Andreas Stephan & Jenniffer Solórzano Mosquera, 2017. "Family ownership: does it matter for funding and success of corporate innovations?," Small Business Economics, Springer, vol. 48(4), pages 931-951, April.
    7. Viktor Prokop & Jan Stejskal, 2015. "Determinants of machinery firms' innovation activity - case study from the Czech Republic," ERSA conference papers ersa15p1111, European Regional Science Association.
    8. Schäfer, Dorothea & Stephan, Andreas & Mosquera, Jenniffer Solórzano, 2015. "Innovation Capabilities and Financing Constraints of Family Firms," Working Paper Series in Economics and Institutions of Innovation 425, Royal Institute of Technology, CESIS - Centre of Excellence for Science and Innovation Studies.
    9. repec:eee:respol:v:46:y:2017:i:9:p:1570-1579 is not listed on IDEAS
    10. Brown, Ross & Lee, Neil, 2014. "Funding issues confronting high growth SMEs in the UK," LSE Research Online Documents on Economics 57264, London School of Economics and Political Science, LSE Library.
    11. Giebel, Marek & Kraft, Kornelius, 2018. "Bank credit supply and firm innovation," ZEW Discussion Papers 18-011, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    12. Olivier Brossard & Stéphanie Lavigne & Mustafa Erdem Sakinç, 2013. "Ownership structures and R&D in Europe: the good institutional investors, the bad and ugly impatient shareholders," Industrial and Corporate Change, Oxford University Press, vol. 22(4), pages 1031-1068, August.
    13. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2012. "Innovation and Finance: An SFC Analysis of Great Surges of Development," Economics Working Paper Archive wp_733, Levy Economics Institute.
    14. repec:eee:tefoso:v:127:y:2018:i:c:p:112-126 is not listed on IDEAS
    15. Faruk Ülgen, 2013. "Redesigning finance towards job-creating long-term development : some regulatory roots," Post-Print halshs-00957355, HAL.
    16. Dominykas Poderys, 2015. "Does Access to External Finance Affect Development of Small and Medium Enterprises and Economic Growth?," European Journal of Business Science and Technology, Mendel University in Brno, Faculty of Business and Economics, vol. 1(1), pages 43-53, November.
    17. Marc Cowling & Weixi Liu & Maria Minniti & Ning Zhang, 2016. "UK credit and discouragement during the GFC," Small Business Economics, Springer, vol. 47(4), pages 1049-1074, December.
    18. Giebel, Marek & Kraft, Kornelius, 2017. "External financing constraints and firm's innovative activities during the financial crisis," ZEW Discussion Papers 17-064, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    19. Giebel, Marek & Kraft, Kornelius, 2015. "The impact of the financial crisis on investments in innovative firms," ZEW Discussion Papers 15-069, ZEW - Zentrum für Europäische Wirtschaftsforschung / Center for European Economic Research.
    20. Nabil Abou Lebdi & Katrin Hussinger, 2016. "Startup Innovation during the Past Economic Crisis," CREA Discussion Paper Series 16-27, Center for Research in Economic Analysis, University of Luxembourg.
    21. Valérie Revest & Alessandro Sapio, 2016. "Graduation and sell-out strategies in the Alternative Investment Market," Discussion Papers 4_2016, CRISEI, University of Naples "Parthenope", Italy.
    22. repec:prg:jnlcbr:v:2017:y:2017:i:2:id:181:p:64-76 is not listed on IDEAS
    23. Alessandro Caiani & Antoine Godin & Stefano Lucarelli, 2014. "Innovation and finance: a stock flow consistent analysis of great surges of development," Journal of Evolutionary Economics, Springer, vol. 24(2), pages 421-448, April.
    24. Masiak, Christian & Moritz, Alexandra & Lang, Frank, 2017. "Financing Patterns of European SMEs Revisited: An Updated Empirical Taxonomy and Determinants of SME Financing Clusters," EIF Working Paper Series 2017/40, European Investment Fund (EIF).

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