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Are firms in "backward" areas of developed regions more financially constrained? The case of Italian SMEs

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  • Cristiana Donati
  • Domenico Sarno

Abstract

Based on GMM-system estimates of a large panel data set of Italian small- and medium-sized firms (SMEs) observed in the years 2001–2008, the analysis confirms that the growth of smaller firms is more dependent on internal resources than that of larger firms. In this regard, we adopt the standard model used to test the law of proportionate effect, augmented by the cash flow variable, to examine both the growth profile of Italian SMEs and the growth-cash flow nexus. We also show that for the SMEs in the Southern "backward" regions of Italy, the dependence of firm growth on inside finance is more intense than for firms operating in the more developed regions of the country. We conclude remarking that the tightness of the financial arrangement allows a downgraded size distribution, as the right-skewed firm size distribution of the Southern SMEs seems to suggest.

Suggested Citation

  • Cristiana Donati & Domenico Sarno, 2015. "Are firms in "backward" areas of developed regions more financially constrained? The case of Italian SMEs," Industrial and Corporate Change, Oxford University Press and the Associazione ICC, vol. 24(6), pages 1353-1375.
    • Handle: RePEc:oup:indcch:v:24:y:2015:i:6:p:1353-1375.
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    File URL: http://hdl.handle.net/10.1093/icc/dtu030
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    Cited by:

    1. Lavinia Piemontese, 2020. "Uncovering Illegal and Underground Economies: The Case of Mafia Extortion Racketeering," Working Papers 2025, Groupe d'Analyse et de Théorie Economique Lyon St-Étienne (GATE Lyon St-Étienne), Université de Lyon.
    2. Lavinia Piemontese, 2021. "Uncovering Illegal and Underground Economies: The Case of Mafia Extortion Racketeering," Working Papers halshs-02928546, HAL.

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