Access to finance and firm innovation

Access to finance and firm innovation PurposeThe study aims to examine the importance of access to finance in firm innovation by using firm-level data from the World Bank enterprise survey (WBES) on selected African countries.Design/methodology/approachThis study utilises firm-level data from the WBES database and computes aggregate innovation index by using multiple correspondent analysis. The authors then apply instrumental variable models (to control for possible endogeneity between innovation and finance) to assess the link between finance and innovation.FindingsThe research finds that finance in the form of overdraft overwhelmingly drives innovation in all selected countries – Cameroon, Kenya, Morocco, Nigeria and South Africa. Trade credit enhances innovation among firms in Nigeria, South Africa and Cameroon, while asset finance drives innovation amongst firms in Cameroon, Nigeria and South Africa.Practical implicationsPolicy incentives such as tax breaks could be put in place for financial intermediaries that have shown proof of extending loans to financially constraint firms to enable them to innovate. Furthermore, different financial institutions such as microfinance institutions can be supported to increase credit to enterprises. Partnerships with organisations willing to fund firms and support start-ups should be encouraged. One of such support mechanisms could be specialised schemes such as a credit guarantee scheme to encourage and secure lending to enterprises to promote innovation.Originality/valueThis paper provides empirical insights into how finance enhances innovation in African enterprises. It also shows how different finance structures (overdraft, asset finance and trade credit) affect firm innovation in different African countries. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Journal of Financial Economic Policy Emerald Publishing

Loading next page...
 
/lp/emerald-publishing/access-to-finance-and-firm-innovation-qCY2mpKlB1
Publisher
Emerald Publishing
Copyright
Copyright © Emerald Group Publishing Limited
ISSN
1757-6385
DOI
10.1108/JFEP-10-2016-0070
Publisher site
See Article on Publisher Site

Abstract

PurposeThe study aims to examine the importance of access to finance in firm innovation by using firm-level data from the World Bank enterprise survey (WBES) on selected African countries.Design/methodology/approachThis study utilises firm-level data from the WBES database and computes aggregate innovation index by using multiple correspondent analysis. The authors then apply instrumental variable models (to control for possible endogeneity between innovation and finance) to assess the link between finance and innovation.FindingsThe research finds that finance in the form of overdraft overwhelmingly drives innovation in all selected countries – Cameroon, Kenya, Morocco, Nigeria and South Africa. Trade credit enhances innovation among firms in Nigeria, South Africa and Cameroon, while asset finance drives innovation amongst firms in Cameroon, Nigeria and South Africa.Practical implicationsPolicy incentives such as tax breaks could be put in place for financial intermediaries that have shown proof of extending loans to financially constraint firms to enable them to innovate. Furthermore, different financial institutions such as microfinance institutions can be supported to increase credit to enterprises. Partnerships with organisations willing to fund firms and support start-ups should be encouraged. One of such support mechanisms could be specialised schemes such as a credit guarantee scheme to encourage and secure lending to enterprises to promote innovation.Originality/valueThis paper provides empirical insights into how finance enhances innovation in African enterprises. It also shows how different finance structures (overdraft, asset finance and trade credit) affect firm innovation in different African countries.

Journal

Journal of Financial Economic PolicyEmerald Publishing

Published: Apr 3, 2018

There are no references for this article.

You’re reading a free preview. Subscribe to read the entire article.


DeepDyve is your
personal research library

It’s your single place to instantly
discover and read the research
that matters to you.

Enjoy affordable access to
over 18 million articles from more than
15,000 peer-reviewed journals.

All for just $49/month

Explore the DeepDyve Library

Search

Query the DeepDyve database, plus search all of PubMed and Google Scholar seamlessly

Organize

Save any article or search result from DeepDyve, PubMed, and Google Scholar... all in one place.

Access

Get unlimited, online access to over 18 million full-text articles from more than 15,000 scientific journals.

Your journals are on DeepDyve

Read from thousands of the leading scholarly journals from SpringerNature, Elsevier, Wiley-Blackwell, Oxford University Press and more.

All the latest content is available, no embargo periods.

See the journals in your area

DeepDyve

Freelancer

DeepDyve

Pro

Price

FREE

$49/month
$360/year

Save searches from
Google Scholar,
PubMed

Create folders to
organize your research

Export folders, citations

Read DeepDyve articles

Abstract access only

Unlimited access to over
18 million full-text articles

Print

20 pages / month

PDF Discount

20% off