Permanent link to Research Commons versionhttps://hdl.handle.net/10289/15424
This paper explores the relationship between firm-level innovation and external finance for small and medium enterprises (SMEs). Our sample consists of 13,430 firms from Eastern Europe and Central Asian countries. A propensity score matching approach reports a positive relationship between formal finance and product and process innovations, which is greater for early-stage SMEs than for mature counterparts. However, informal finance has more significant impact on mature firms’ product innovation. Our empirical evidence highlights policy implications for countries desiring to enhance the innovation of their SMEs by improving the external finance of these SMEs.
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This is an author’s accepted version of an article published in the International Review of Financial Analysis. © 2019 Elsevier Science
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