Access to finance and firm innovation

2018 ◽  
Vol 10 (1) ◽  
pp. 73-94 ◽  
Author(s):  
MccPowell Sali Fombang ◽  
Charles Komla Adjasi
Keyword(s):  
South Africa ◽  
Trade Credit ◽  
Microfinance Institutions ◽  
African Countries ◽  
Access To Finance ◽  
Firm Level ◽  
Firm Innovation ◽  
Content Type ◽  
Level Data ◽  
Firm Level Data

Purpose The 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/approach This 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. Findings The 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 implications Policy 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/value This 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.

The finance of innovation in Africa

2019 ◽  
Vol 23 (3) ◽  
pp. 348-382 ◽  
Author(s):  
Misraku Molla Ayalew ◽  
Zhang Xianzhi ◽  
Demis Hailegebreal Hailu
Keyword(s):  
Developing Countries ◽  
Trade Credit ◽  
Innovation Process ◽  
Medium Size ◽  
African Countries ◽  
Firm Level ◽  
Content Type ◽  
Significant Difference ◽  
Innovative Firms ◽  
Finance Innovation

Purpose The purpose of this paper is to investigate how firms in developing countries finance innovation. Notably, the study seeks to investigate whether innovative firms exhibit financing patterns different from those of non-innovative ones. It also examines the effect of financing sources on firm’s probability to innovate. Design/methodology/approach The study utilizes firm-level data from the World Bank Enterprise Survey. From 28 African countries, 11,173 firms have been included in the sample. A statistical t-test is used for two independent samples and logistic regression models. Findings The results show that innovative firms, specifically innovative small- and medium-size firms exhibit financing patterns different from non-innovative peers. Further analysis indicates that there is no statistically significant difference between the financing patterns of innovative and non-innovative large firms. In Africa, innovation is mostly financed using internal sources and bank finance. Equity finance and bank finance have shown a higher effect followed by internal finance, finance from non-bank financial institutions and trade credit finance on firms’ probability to innovate. Practical implications The management of innovative firms should reduce dependency on short-term and retained earning financing and increase the use of long-term instruments improve innovation performance. Social implications A pending policy task for African leaders is to design and evaluate reforms to create a strong financial sector that willing to support the innovation process. Originality/value This study contributes to the existent literature on finance of innovation by examining how firms finance innovation activities in developing countries. This study provides evidence on how innovative firms exhibit financing patterns different from non-innovative ones from developing countries.

A neglected input to production: the role of ICT-schooled employees in firm performance

2017 ◽  
Vol 38 (3) ◽  
pp. 373-391 ◽  
Author(s):  
Eva Hagsten ◽  
Anna Sabadash
Keyword(s):  
Data Sets ◽  
Firm Level ◽  
Broadband Internet ◽  
Content Type ◽  
Institutional Settings ◽  
Level Data ◽  
Firm Level Data ◽  
Information And Communication ◽  
Econometric Approach

Purpose The purpose of this paper is to broaden the perspective on how information and communication technology (ICT) relates to productivity by introducing a novel ICT variable: the share of ICT-schooled employees in firms, an intangible input often neglected or difficult to measure. Design/methodology/approach Based on a Cobb-Douglas production function specification, the association between the share of ICT-schooled employees and firm productivity is estimated by the use of unique comparable multi-linked firm-level data sets from statistical offices in six European countries for the period of 2001-2009. Findings There are indications that the share of ICT-schooled employees significantly and positively relates to productivity, and also that this relationship is generally more persistent than that of ICT intensity of firms, measured as the proportion of broadband internet-enabled employees. However, the strength of the association varies across countries and demonstrates that underlying factors, such as industry structure and institutional settings might be of importance too. Research limitations/implications Data features and the way to access harmonised firm-level data across countries affect the choice of econometric approach and output variable. Practical implications The results emphasise the importance of specific ICT skills in firms independently of where in the organisation the employee works. Originality/value Studies on associations between employees with specific (higher) education based on formal credentials and productivity are rare. Even more uncommon is the cross-country setting with harmonised data including general ICT intensity of firms.

Firm size and the political cycle premium

2015 ◽  
Vol 41 (10) ◽  
pp. 1077-1095
Author(s):  
Chris B Malone ◽  
Hamish Anderson ◽  
Peng Cheng
Keyword(s):  
New Zealand ◽  
Small Firms ◽  
The Political ◽  
Firm Level ◽  
Content Type ◽  
Level Data ◽  
Political Cycle ◽  
Firm Level Data ◽  
The Usa ◽  
Political Term

Purpose – The purpose of this paper is to use firm-level data to examine whether the political cycle differentially relates to small vs large firms in New Zealand; a country that operates a unicameral political system has a short three-year political term and a right-of-centre stock market premium exists. Design/methodology/approach – Using firm-level data from 1972 to 2010, the authors examine monthly returns during right-of-centre National governments and left-of-centre Labour governments. The authors apply Santa Clara and Valkanov (2003) regression analysis approach to examine the political cycle impact on firm returns. Findings – Like in the USA, New Zealand’s political cycle premium is driven by small firms; however, the results are opposite. In New Zealand, periods governed by the right of the political spectrum produce significantly higher stock returns than those from the left and this finding is primarily driven by small firms who perform particularly poorly under left-of-centre governments. Research limitations/implications – Small firms were relatively heavily affected by the move to an open, deregulated economy; they were also less able to cope with tight monetary conditions, and periods of sharply falling inflation. New Zealand’s three-year political term may encourage newly formed governments to implement relatively fast moving shifts in policy where a more reasoned and steady approach would be warranted. Originality/value – This is the first paper to use firm-level data outside of the USA to examine the political cycle impact.

scholarly journals Firm Characteristics, Financing and Firm Innovation in Africa

2021 ◽  
Vol 9 (7) ◽  
pp. 177-198
Author(s):  
Michael Asiedu
Keyword(s):  
New Technology ◽  
Capacity Utilization ◽  
Developed Countries ◽  
Structural Constraints ◽  
Firm Characteristics ◽  
African Countries ◽  
Firm Level ◽  
Firm Innovation ◽  
Funding Sources ◽  
Level Data

The study employed firm level data from the World Bank’s Enterprise Survey Indicator Database to investigate firm characteristics associated with firm innovation in 32 African countries, for the period 2009 to 2018. We find that firm level innovation, including the introduction of significantly new products (H1), new or significantly improved methods of manufacturing products (New Technology) are strongly associated with external funding sources (funds from Banks and non-banking institutions). In addition, firm level characteristics such as firm age, female ownership, capacity utilization, educated labor force, exposure to competition is strongly associated with firm innovation. These findings are very important for countries in Africa (and other less-developed countries) who spend less on research and development due financing and structural constraints but want to accelerate economic growth and increased productivity.

How does the globalization of firms affect corruption in developing economies?

2017 ◽  
Vol 21 (3) ◽  
pp. 256-270 ◽  
Author(s):  
Bokyeong Park ◽  
Onon Khanoi
Keyword(s):  
Foreign Investment ◽  
Developing Economies ◽  
Probit Model ◽  
Policy Implications ◽  
Firm Level ◽  
Content Type ◽  
Exporting Firms ◽  
Country Level ◽  
Level Data ◽  
Firm Level Data

Purpose The purpose of this paper is to examine how firms’ characteristics related to globalization affect their perception on corruption and actual experiences in bribery. It focuses on two indicators of globalization, namely, foreign ownership and export, and confines the scope to developing economies. Design/methodology/approach This analysis uses firm-level data with observation over 60,000 collected from 94 developing economies. The paper employs the probit model to examine how firm characteristics related to globalization affect corruption perception (CP) and incidence. Findings The empirical results reveal that for foreign-invested companies, there is a substantial discrepancy between the perceived corruption and the actual. Although they are involved in bribery as frequently as, or less frequently than local firms, they have greater CPs. Exporting firms are more frequently solicited for bribes, but the effect disappears when time spent for government contact is controlled for. Consequently, foreign investment partly contributes to the corruption control, but the export orientation of firms rather aggravates corruption due to regulative environments in developing economies. Practical implications This study provides policy implications that the corruption control through globalization requires streamlining of administration procedure related to foreign investment or trade and, thus, shortening time to deal with public officials. In addition, governments need to emphasize the importance of foreign investment and prevent unethical practices mediated by local partners. Originality/value The greatest novelty of this paper lies in using firm level data instead of country level unlike most of the literature. Moreover, the authors focus on firms only in developing economies. As well, unlike most studies using only perception indicators as the proxy of corruption, this paper considers both CPs and actual incidence, and compares each other.

scholarly journals Are firms paying more for performance?

2016 ◽  
Vol 37 (2) ◽  
pp. 323-343 ◽  
Author(s):  
John Forth ◽  
Alex Bryson ◽  
Lucy Stokes
Keyword(s):  
Economic Importance ◽  
Firm Level ◽  
Wage Bill ◽  
Content Type ◽  
Level Data ◽  
Bonus Payments ◽  
Firm Level Data ◽  
Nationally Representative ◽  
Substantial Change ◽  
Two Sectors

Purpose – The purpose of this paper is to investigate changes in the economic importance of performance-related-pay (PRP) in Britain through the 2000s using firm-level data. Design/methodology/approach – The authors utilise nationally representative, monthly data on the total wage bill and employment of around 8,500 firms. Using these data, the authors decompose the share of the total economy-wide wage bill accounted for by bonuses into the shares of employment in the PRP and non-PRP sectors, the ratio of base pay between the two sectors, and the gearing of bonus payments to base pay within the PRP sector. Findings – The growth in the economic importance of bonuses in Britain in the mid-2000s – and subsequent fluctuations since the onset of recession in 2008 – can be almost entirely explained by changes in the gearing of bonus to base pay within the PRP sector. There has been no substantial change in the percentage of employment accounted for by PRP firms; if anything it has fallen over time. Furthermore, movements in the gearing of bonuses to base pay in the economy are heavily influenced by changes in Finance: a sector which accounts for a large proportion of all bonus payments in Britain. Research limitations/implications – The paper demonstrates the importance of understanding further how firms decide the size of bonus payments in a given period. Originality/value – This is the first paper to present monthly firm-level data for Britain on the incidence and size of bonus payments in the 2000s.

The relationship between organizational slack and innovation: revisited

2014 ◽  
Vol 29 (1) ◽  
pp. 26-42 ◽  
Author(s):  
Fariss Terry Mousa ◽  
Jaideep Chowdhury
Keyword(s):  
Fixed Effect ◽  
Publicly Traded ◽  
Firm Level ◽  
Firm Innovation ◽  
Content Type ◽  
Financial Slack ◽  
Level Data ◽  
Economic Downturns ◽  
The Impact ◽  
The Relationship

Purpose – The slack-innovation relationship has interested scholars for years. The authors aim to delve into the impact of financial slack on firm innovation by replicating a classic study arguing that this relationship has an inverse U-shape. Design/methodology/approach – The sample consists of all US firms that were publicly traded between 1993 and 2011. The authors employ the standard econometrics methodology of panel regression with firm-fixed effect and time-fixed effect to estimate the regression equation of firm innovation on financial slack. Findings – The authors find that the relationship between financial slack and R&D investments is similar to that suggested by earlier authors, thus enhancing the generalizability of this important finding in management research. The authors also find that this relationship holds even during economic downturns. Originality/value – The authors replicate Nohria and Gulati's classic study by considering the impact of slack on innovation. The authors also move away from survey data, as used by Nohria and Gulati. The authors utilize actual firm-level data for a large sample of US publicly traded firms from 1993 to 2011, thus enhancing the generalizability of these findings.

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