Financial Development and Innovation in Small Firms
This paper uses firm level data from a cross-section of 57 countries to study how financial development affects innovation in small firms. The analysis finds that relative to large firms in the same industry, spending on research and development by...
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| Format: | Policy Research Working Paper |
| Language: | English |
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World Bank, Washington, DC
2012
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| Online Access: | http://documents.worldbank.org/curated/en/2007/09/8621977/financial-development-innovation-small-firms http://hdl.handle.net/10986/7590 |
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okr-10986-75902021-04-23T14:02:34Z Financial Development and Innovation in Small Firms Sharma, Siddharth ACCESS TO FINANCE AVERAGE INTEREST AVERAGE INTEREST RATE BANK DEPOSIT BANK DEPOSITS BANK FUNDING BANKING SECTOR BANKING SYSTEM BOND CAPITAL MARKETS CHECKS COLLATERAL COMPETITORS CORPORATE PERFORMANCE CORPORATION CORRELATIONS CREDIT BANK CREDIT CONSTRAINTS CREDIT RELATIONSHIPS DEBT DEBT FINANCE DEBT MARKETS DEPOSIT DEPOSIT ACCOUNTS DERIVATIVE DOMESTIC BANKS DOMESTIC MARKET DOMESTIC MARKETS DUMMY VARIABLE ECONOMIC GROWTH ECONOMIES OF SCALE EMPLOYEE ENTRY BARRIERS EQUIPMENT EQUITY FINANCING EXCLUSION EXPENDITURE EXTERNAL FINANCE EXTERNAL FINANCING EXTERNAL FUNDS FINANCIAL CONSTRAINT FINANCIAL DEVELOPMENT FINANCIAL INNOVATIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL STRUCTURE FINANCIAL SYSTEMS FINANCING COST FIRM PERFORMANCE FIRM SIZE FIXED COST FIXED INVESTMENT FOREIGN BANKS GOVERNMENT BANKS HOLDING INCOME LEVEL INFORMATIONAL ASYMMETRIES INTANGIBLE INTANGIBLE ASSETS INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY RIGHTS INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATE SPREADS INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCIAL STATISTICS INVESTING LARGE FIRMS LENDERS LIQUIDITY LIQUIDITY CONSTRAINTS LOAN SIZE LOW INCOME LOW INTEREST RATE LOWER INTEREST RATE MARKET COMPETITION MARKET FAILURES MARKET INTEGRATION MARKET LIQUIDITY MARKET SHARE MARKET STRUCTURE MARKET VALUE MORAL HAZARD NEW BUSINESS POLITICAL ECONOMY POTENTIAL INVESTORS PRIVATE CREDIT PRIVATE EQUITY PROBABILITY PRODUCTIVITY PROPERTY RIGHTS R&D R&D FINANCING R&D PROJECTS RENTS RESEARCH WORKING PAPERS RESEARCHERS RETURNS SALES SAVINGS SAVINGS DEPOSITS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL FARMS SMALL FIRM SMALL FIRMS SMALL LOAN SMALL LOANS SMALLER FIRMS SOURCES OF FUNDS STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKET DEVELOPMENT STOCK MARKETS STOCKS SURVEY DATA SURVEY INSTRUMENTS TANGIBLE ASSETS TIME DEPOSIT TURNOVER VENTURE CAPITAL WAGES This paper uses firm level data from a cross-section of 57 countries to study how financial development affects innovation in small firms. The analysis finds that relative to large firms in the same industry, spending on research and development by small firms is more likely and sizable in countries at higher levels of financial development. The estimates imply that among firms doing research and development in a country like Romania, which is at the 20th percentile of financial development, a 1 standard deviation decrease in firm size is associated with a decrease of 0.7 standard deviations in research and development spending. In contrast, this decrease is only 0.2 standard deviations in a country like South Africa, which is at the 80th percentile of the distribution of financial development. Small firms also report producing more innovations per unit of research and development spending than large firms, and this gap is narrower in countries at higher levels of financial development. As a robustness check, the author shows that these patterns are stronger in industries inherently more reliant on external finance. 2012-06-08T20:20:36Z 2012-06-08T20:20:36Z 2007-09 http://documents.worldbank.org/curated/en/2007/09/8621977/financial-development-innovation-small-firms http://hdl.handle.net/10986/7590 English Policy Research Working Paper; No. 4350 CC BY 3.0 IGO http://creativecommons.org/licenses/by/3.0/igo/ World Bank World Bank, Washington, DC Publications & Research :: Policy Research Working Paper Publications & Research |
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Digital Repository |
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Foreign Institution |
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Digital Repositories |
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World Bank Open Knowledge Repository |
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World Bank |
| language |
English |
| topic |
ACCESS TO FINANCE AVERAGE INTEREST AVERAGE INTEREST RATE BANK DEPOSIT BANK DEPOSITS BANK FUNDING BANKING SECTOR BANKING SYSTEM BOND CAPITAL MARKETS CHECKS COLLATERAL COMPETITORS CORPORATE PERFORMANCE CORPORATION CORRELATIONS CREDIT BANK CREDIT CONSTRAINTS CREDIT RELATIONSHIPS DEBT DEBT FINANCE DEBT MARKETS DEPOSIT DEPOSIT ACCOUNTS DERIVATIVE DOMESTIC BANKS DOMESTIC MARKET DOMESTIC MARKETS DUMMY VARIABLE ECONOMIC GROWTH ECONOMIES OF SCALE EMPLOYEE ENTRY BARRIERS EQUIPMENT EQUITY FINANCING EXCLUSION EXPENDITURE EXTERNAL FINANCE EXTERNAL FINANCING EXTERNAL FUNDS FINANCIAL CONSTRAINT FINANCIAL DEVELOPMENT FINANCIAL INNOVATIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL STRUCTURE FINANCIAL SYSTEMS FINANCING COST FIRM PERFORMANCE FIRM SIZE FIXED COST FIXED INVESTMENT FOREIGN BANKS GOVERNMENT BANKS HOLDING INCOME LEVEL INFORMATIONAL ASYMMETRIES INTANGIBLE INTANGIBLE ASSETS INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY RIGHTS INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATE SPREADS INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCIAL STATISTICS INVESTING LARGE FIRMS LENDERS LIQUIDITY LIQUIDITY CONSTRAINTS LOAN SIZE LOW INCOME LOW INTEREST RATE LOWER INTEREST RATE MARKET COMPETITION MARKET FAILURES MARKET INTEGRATION MARKET LIQUIDITY MARKET SHARE MARKET STRUCTURE MARKET VALUE MORAL HAZARD NEW BUSINESS POLITICAL ECONOMY POTENTIAL INVESTORS PRIVATE CREDIT PRIVATE EQUITY PROBABILITY PRODUCTIVITY PROPERTY RIGHTS R&D R&D FINANCING R&D PROJECTS RENTS RESEARCH WORKING PAPERS RESEARCHERS RETURNS SALES SAVINGS SAVINGS DEPOSITS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL FARMS SMALL FIRM SMALL FIRMS SMALL LOAN SMALL LOANS SMALLER FIRMS SOURCES OF FUNDS STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKET DEVELOPMENT STOCK MARKETS STOCKS SURVEY DATA SURVEY INSTRUMENTS TANGIBLE ASSETS TIME DEPOSIT TURNOVER VENTURE CAPITAL WAGES |
| spellingShingle |
ACCESS TO FINANCE AVERAGE INTEREST AVERAGE INTEREST RATE BANK DEPOSIT BANK DEPOSITS BANK FUNDING BANKING SECTOR BANKING SYSTEM BOND CAPITAL MARKETS CHECKS COLLATERAL COMPETITORS CORPORATE PERFORMANCE CORPORATION CORRELATIONS CREDIT BANK CREDIT CONSTRAINTS CREDIT RELATIONSHIPS DEBT DEBT FINANCE DEBT MARKETS DEPOSIT DEPOSIT ACCOUNTS DERIVATIVE DOMESTIC BANKS DOMESTIC MARKET DOMESTIC MARKETS DUMMY VARIABLE ECONOMIC GROWTH ECONOMIES OF SCALE EMPLOYEE ENTRY BARRIERS EQUIPMENT EQUITY FINANCING EXCLUSION EXPENDITURE EXTERNAL FINANCE EXTERNAL FINANCING EXTERNAL FUNDS FINANCIAL CONSTRAINT FINANCIAL DEVELOPMENT FINANCIAL INNOVATIONS FINANCIAL INSTITUTIONS FINANCIAL INTERMEDIARIES FINANCIAL INTERMEDIATION FINANCIAL MARKET FINANCIAL MARKETS FINANCIAL STRUCTURE FINANCIAL SYSTEMS FINANCING COST FIRM PERFORMANCE FIRM SIZE FIXED COST FIXED INVESTMENT FOREIGN BANKS GOVERNMENT BANKS HOLDING INCOME LEVEL INFORMATIONAL ASYMMETRIES INTANGIBLE INTANGIBLE ASSETS INTELLECTUAL PROPERTY INTELLECTUAL PROPERTY RIGHTS INTEREST RATE INTEREST RATE DATA INTEREST RATE SPREAD INTEREST RATE SPREADS INTEREST RATES INTERNAL FUNDS INTERNATIONAL BANK INTERNATIONAL FINANCIAL STATISTICS INVESTING LARGE FIRMS LENDERS LIQUIDITY LIQUIDITY CONSTRAINTS LOAN SIZE LOW INCOME LOW INTEREST RATE LOWER INTEREST RATE MARKET COMPETITION MARKET FAILURES MARKET INTEGRATION MARKET LIQUIDITY MARKET SHARE MARKET STRUCTURE MARKET VALUE MORAL HAZARD NEW BUSINESS POLITICAL ECONOMY POTENTIAL INVESTORS PRIVATE CREDIT PRIVATE EQUITY PROBABILITY PRODUCTIVITY PROPERTY RIGHTS R&D R&D FINANCING R&D PROJECTS RENTS RESEARCH WORKING PAPERS RESEARCHERS RETURNS SALES SAVINGS SAVINGS DEPOSITS SMALL BUSINESS SMALL BUSINESS FINANCE SMALL FARMS SMALL FIRM SMALL FIRMS SMALL LOAN SMALL LOANS SMALLER FIRMS SOURCES OF FUNDS STOCK MARKET STOCK MARKET CAPITALIZATION STOCK MARKET DEVELOPMENT STOCK MARKETS STOCKS SURVEY DATA SURVEY INSTRUMENTS TANGIBLE ASSETS TIME DEPOSIT TURNOVER VENTURE CAPITAL WAGES Sharma, Siddharth Financial Development and Innovation in Small Firms |
| relation |
Policy Research Working Paper; No. 4350 |
| description |
This paper uses firm level data from a
cross-section of 57 countries to study how financial
development affects innovation in small firms. The analysis
finds that relative to large firms in the same industry,
spending on research and development by small firms is more
likely and sizable in countries at higher levels of
financial development. The estimates imply that among firms
doing research and development in a country like Romania,
which is at the 20th percentile of financial development, a
1 standard deviation decrease in firm size is associated
with a decrease of 0.7 standard deviations in research and
development spending. In contrast, this decrease is only 0.2
standard deviations in a country like South Africa, which is
at the 80th percentile of the distribution of financial
development. Small firms also report producing more
innovations per unit of research and development spending
than large firms, and this gap is narrower in countries at
higher levels of financial development. As a robustness
check, the author shows that these patterns are stronger in
industries inherently more reliant on external finance. |
| format |
Publications & Research :: Policy Research Working Paper |
| author |
Sharma, Siddharth |
| author_facet |
Sharma, Siddharth |
| author_sort |
Sharma, Siddharth |
| title |
Financial Development and Innovation in Small Firms |
| title_short |
Financial Development and Innovation in Small Firms |
| title_full |
Financial Development and Innovation in Small Firms |
| title_fullStr |
Financial Development and Innovation in Small Firms |
| title_full_unstemmed |
Financial Development and Innovation in Small Firms |
| title_sort |
financial development and innovation in small firms |
| publisher |
World Bank, Washington, DC |
| publishDate |
2012 |
| url |
http://documents.worldbank.org/curated/en/2007/09/8621977/financial-development-innovation-small-firms http://hdl.handle.net/10986/7590 |
| _version_ |
1764402542549139456 |