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Financial Constraints on New Firms: Looking for Regional Disparities

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  • Jean Bonnet
  • Marcus Dejardin
  • Sylvie Cieply

Abstract

Financial constraints affecting new firms are some of the factors most cited for impeding entrepreneurial dynamics from flourishing. This article introduces the problem of regional patterns of financial constraints. The research is conducted with regard to the French regions and the new French firms being tracked at the firm level. As regard to new firms, the research relies mainly on the use of the Information System on New Firms (SINE) that is released by the French National Institute of Statistical and Economic Studies (INSEE). The SINE dataset does not refer to the general entrepreneurial intention in the French population but to entrepreneurial projects that are concretized in new firms. As a consequence, entrepreneurial intentions that are aborted due to financial constraints are not reported. The point is of importance as the firm financing conditions are considered. First, an assessment of the global situation of the banking density and activity within and between the French regions leads to the conclusion of a relatively homogeneous banking supply and banking activity, with the activity of the core-region Île-de-France appearing however more contrasted. Second, the financial constraints affecting new firms are distinguished according to a four-case typology. Additionally to the "no credit rationing" situation, "weak" or "strong credit rationing" are distinguished from the "self-constraint" situation, a situation describing the case when firms do not ask for a bank loan although they declare facing financial constraints subsequently. It appears that a majority of new firms is not facing credit rationing, but also that a non-negligible share is "self-constrained". The classification is, third and finally, differentiated according to the regions. Despite the relative homogeneity of the banking supply, it appears that some regional differences may still be at work. The given explanations are still hypothetical at this stage but the empirical results suggest already that the regional dimension should definitely deserve further attention.

Suggested Citation

  • Jean Bonnet & Marcus Dejardin & Sylvie Cieply, 2005. "Financial Constraints on New Firms: Looking for Regional Disparities," Papers on Entrepreneurship, Growth and Public Policy 2005-37, Max Planck Institute of Economics, Entrepreneurship, Growth and Public Policy Group.
    • Handle: RePEc:esi:egpdis:2005-37
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    Cited by:

    1. Wim Naudé & Thomas Gries & Eric Wood & Aloe Meintjies, 2008. "Regional determinants of entrepreneurial start-ups in a developing country," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 20(2), pages 111-124, March.
    2. Thomas Gries & Wim Naudé, 2010. "Entrepreneurship and structural economic transformation," Small Business Economics, Springer, vol. 34(1), pages 13-29, January.
    3. Giuseppe Arcuri & Marc Brunetto & Nadine Levratto, 2019. "Spatial patterns and determinants of firm exit: an empirical analysis on France," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 62(1), pages 99-118, February.
    4. Juan A. Máñez Castillejo & Oscar Vicente-Chirivella, 2019. "Exports of Spanish manufacturing firms and financial constraints," Working Papers 1921, Department of Applied Economics II, Universidad de Valencia.
    5. Thomas Gries & Wim Naudé, 2008. "Entrepreneurship and Regional Economic Growth: Towards A General Theory of Start-Ups," WIDER Working Paper Series RP2008-70, World Institute for Development Economic Research (UNU-WIDER).
    6. Gries Thomas & Naude Wim, 2011. "Entrepreneurship, Structural Change and a Global Economic Crisis," Entrepreneurship Research Journal, De Gruyter, vol. 1(3), pages 1-43, July.
    7. Gries Thomas & Naude Wim, 2011. "Entrepreneurship, Structural Change and a Global Economic Crisis," Entrepreneurship Research Journal, De Gruyter, vol. 1(3), pages 1-43, July.
    8. Giuseppe Arcuri & Nadine Levratto, 2017. "New firms’ bankruptcy: does local banking market matter?," EconomiX Working Papers 2017-31, University of Paris Nanterre, EconomiX.
    9. Jean Bonnet & Sylvie Cieply & Marcus Dejardin, 2007. "Does the regional dimension matter as regards finance and entrepreneurship ?," Post-Print halshs-00337426, HAL.
    10. Wim Naudé, 2016. "Entrepreneurship and the Reallocation of African Farmers," Agrekon, Taylor & Francis Journals, vol. 55(1-2), pages 1-33, June.
    11. Juan A. Máñez & María E. Rochina-Barrachina & Juan A. Sanchis-Llopis & Oscar Vicente, 2013. "Financial constraints and Spanish manufacturing firms’ R&D and exporting," Working Papers 1324, Department of Applied Economics II, Universidad de Valencia.
    12. Jože Damijan & Črt Kostevc & Sašo Polanec, 2015. "Access to finance, exporting and a non-monotonic firm expansion," Empirica, Springer;Austrian Institute for Economic Research;Austrian Economic Association, vol. 42(1), pages 131-155, February.
    13. Joze P. Damijan & Crt Kostevc, 2011. "Firms’ Patterns of Trade and Access to Finance," Chapters, in: Ewald Nowotny & Peter Mooslechner & Doris Ritzberger-Grünwald (ed.), Post-Crisis Growth and Integration in Europe, chapter 19, Edward Elgar Publishing.
    14. Martin Koning & Marie-Estelle Binet & François Facchini, 2010. "Les déterminants de la dynamique entrepreneuriale dans les régions françaises (1994-2003)," Working Papers halshs-00467900, HAL.
    15. Naudé, Wim, 2016. "Entrepreneurship and the Reallocation of African Farmers," International Journal of Agricultural Sciences and Technology (IJAGST), SvedbergOpen, vol. 55(1-2), May.
    16. Giuseppe Arcuri & Nadine Levratto, 2020. "Early stage SME bankruptcy: does the local banking market matter?," Small Business Economics, Springer, vol. 54(2), pages 421-436, February.

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    More about this item

    Keywords

    Financial constraints; Credit rationing; New Firms; Regional Disparities;
    All these keywords.

    JEL classification:

    • G20 - Financial Economics - - Financial Institutions and Services - - - General
    • M13 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Administration - - - New Firms; Startups
    • R10 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - General

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    1. Socio-Economics of Innovation

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