Equity capital financing of Swedish SMEs, innovation, and decentralized management

Abstract

Purpose The purpose of this paper is to investigate the potential link between Sweden’s high reliance on equity capital financing among small and medium-sized enterprises (SMEs) and its recognition as the most innovative economy in Europe according to the European Innovation Scoreboard (EIS). This paper examines the idea that the high levels of trust within Swedish society can explain why private equity financing is more prevalent among Swedish SMEs. Design/methodology/approach To test these ideas, the authors use data from the Survey on Access to Finance for Enterprises to measure the private equity reliance of firms. The authors also use the EIS to measure the innovation capacity of nations and various aspects of SMEs’ innovation activities. Finally, societal levels of trust are measured through the World Value Survey. Findings First, the authors find that European countries with a higher proportion of SMEs relying on equity financing tend to be ranked as more innovative by the EIS. Second, the authors find that the correlation between a nation’s share of SMEs relying on equity financing and their level of innovation activities is marginally stronger for product innovations than for business process innovations. Third, the authors find that countries with higher levels of trust tend to have higher equity capital reliance among SMEs. Originality/value This study builds upon previous research on equity capital and SMEs’ innovation activity while introducing new insights into the relationship between societal trust and equity financing.

Making an M&A work: equal strategic partnerships smooth the path

“…Angwin and Meadows, 2015; Haspeslagh and Jemison, 1991; Siehl and Smith, 1990). Ström and Esmaeilzadeh (2023) reviewed that literature and proposed a new, more detailed framework while focusing on the entrepreneurial abilities within the acquired firm, which originates from Schumpeter’s view on entrepreneurial profit and abnormal returns. Altogether, four strategies have been identified which have been grouped into four quadrants in Figure 1.…”

“…Ström and Esmaeilzadeh (2023) concluded that the first two overarching strategies – Intensive care & Deculturation and Absorption & Pillage and Plunder – are not suited for acquiring and maintaining KIE firms for the reasons stated in the introduction (loss of routines, higher employee turnover, loss of tacit knowledge). Excluding the Eliminate strategy, where the objective clearly is not to acquire KIE firms and support them, the two remaining strategies – Preservation & Alliance and Symbiosis & Union – are best suited for acquiring KIEs, primarily because they do not eliminate the acquired firm’s autonomy post-transaction.…”

“…Sweden has a long-standing tradition of decentralized management strategies based on loose controls and trust (Ha ˚kanson and Zander, 1988). For example, Sanandaji et al (2023a) found that compared to SMEs in other regions of Europe, Swedish SMEs' reliance on equity financing is higher. Sweden has a long-standing tradition of decentralized management strategies based on loose controls and trust (Ha ˚kanson and Zander, 1988; see also Sanandaji et al (2023b) for a review of the evolution of the Swedish market model).…”