Do R&D Subsidies Affect SMEs' Access to External Financing?

41 Pages Posted: 29 Feb 2008

See all articles by Miguel Meuleman

Miguel Meuleman

Vlerick Business School; University of Nottingham

Wouter De Maeseneire

Vlerick Business School; Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE)

Abstract

Many countries spend sizeable sums of public money on R&D grants to alleviate debt and equity gaps for small firms' innovation projects. In making such awards, knowledgeable government officials may certify firms to private financiers. This paper investigates whether government subsidies to R&D enhance SMEs' access to external financing due to this certification effect. Using a unique Flemish dataset of 1107 approved requests and a control group of 501 denied requests for a specific type of R&D grant, we examine the impact on small firms' external equity, short term and long term debt financing. We find that obtaining a R&D subsidy provides a positive signal about SME quality and results in better access to long-term debt.

Keywords: R&D subsidies, government policy, SMEs, financial constraints, certification hypothesis, behavioural additionality

JEL Classification: G32, H25, O38

Suggested Citation

Meuleman, Miguel and De Maeseneire, Wouter, Do R&D Subsidies Affect SMEs' Access to External Financing?. Available at SSRN: https://ssrn.com/abstract=1099346 or http://dx.doi.org/10.2139/ssrn.1099346

Miguel Meuleman

Vlerick Business School ( email )

Reep 1
Gent, 9000
Belgium
0032(0)92109770 (Phone)
0032(0)92109790 (Fax)

University of Nottingham

University Park
Nottingham, NG8 1BB
United Kingdom

Wouter De Maeseneire (Contact Author)

Vlerick Business School ( email )

Reep 1
Ghent
BE-9000 Ghent
Belgium

Erasmus University Rotterdam (EUR) - Erasmus School of Economics (ESE) ( email )

P.O. Box 1738
3000 DR Rotterdam, NL 3062 PA
Netherlands

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