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      Formal credit and innovation: Is there a uniform relationship across types of innovation?

      Wellalage, Nirosha Hewa; Locke, Stuart
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      Formal credit and innovation.pdf
      Accepted version, 1.231Mb
      DOI
       10.1016/j.iref.2020.07.004
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      Permanent link to Research Commons version
      https://hdl.handle.net/10289/15459
      Abstract
      We investigate the formal credit effect on firm level innovations of small and medium enterprises in developing economies. Using the instrumental regression method, we control for potential endogeneity in innovation and credit relationships. Results indicate that formal credit availability boosts all four types of innovations. However, this impact is more significant for soft innovations compared to hard innovations. The results also point to the importance of informal finance as a source of external finance for firms where capital markets suffer from imperfections. Our study encourages the development of policy based on financing for various types of innovation, which is especially suited for developing economies.
      Date
      2020-11-01
      Type
      Journal Article
      Publisher
      ELSEVIER
      Rights
      This is an author’s accepted version of an article published in the journal: International Review of Economics & Finance. © 2020 Elsevier B.V.
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      • Management Papers [1136]
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