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How firms finance innovation. Further empirics from European SMEs
Author(s) -
Aiello Francesco,
Bonanno Graziella,
Rossi Stefania P. S.
Publication year - 2020
Publication title -
metroeconomica
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.256
H-Index - 29
eISSN - 1467-999X
pISSN - 0026-1386
DOI - 10.1111/meca.12298
Subject(s) - probit model , finance , probit , sample (material) , robustness (evolution) , investment (military) , business , capital market , economics , public finance , empirical evidence , macroeconomics , biochemistry , chemistry , philosophy , chromatography , epistemology , politics , political science , law , econometrics , gene
This paper aims to evaluate the role played by different sources of financing when analyzing firms' attitudes towards innovating. The empirical investigation is based on a large sample of European small and medium‐sized enterprises (SMEs) observed over the period 2012–2017. Different measures of finance and several robustness checks are used to select a well‐behaved probit model. The results show that the probability to innovate increases when firms use internal financing and grants. The same applies when funds come from family and friends, while no conclusive evidence is found for bank loans. Recommendations for public policy to encourage firm‐tailored policies to promote investment in intangibles allow firms to benefit from innovation activities. European SMEs will also benefit from capital market developments and the advancement of new financial tools devoted to supporting innovation.