Formal credit and innovation: is there a uniform relationship across types of innovation?
Date
2020
Authors
Wellalage, N.H.
Locke, S.
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Journal article
Citation
International Review of Economics and Finance, 2020; 70:1-15
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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 around financing for various types of innovation, which is especially suited for developing economies.
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Data source: Supplementary data, https://doi.org/10.1016/j.iref.2020.07.004
Link to a related website: https://unpaywall.org/10.1016/j.iref.2020.07.004, Open Access via Unpaywall
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Copyright 2022 Elsevier