Financial constraints, government support, and firm innovation: empirical evidence from developing economies

Chundakkadan, Radeef; Sasidharan, Subash

doi:10.1080/2157930x.2019.1594680

Cited by 41 publications

(42 citation statements)

References 44 publications

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“…Lack of government support will also lead to low knowledge, skills and capabilities of SMEs in managing technology (Belitz and Lejpras, 2016; Ayodeji et al , 2017; Padachi et al , 2018). The findings of this study are consistent with some findings of previous studies indicating that factors hindering the development of SME technology, one of which is government support (Doh and Kim, 2014; Chundakkadan and Sasidharan, 2019).…”

Section: Resultssupporting

confidence: 92%

“…Existing literature indicates that several factors are hindering the development of SME technology, one of which is government support (Doh and Kim, 2014; Chundakkadan and Sasidharan, 2019). The government support is analyzed from financial and nonfinancial aspects.…”

Section: Literature Reviewmentioning

confidence: 99%

“…This impedes investment in innovation (Madrid-Guijarro et al , 2016). As a consequence, innovation will be low because of a shortage of financial resources (Chundakkadan and Sasidharan, 2019). The interest rates are also an obstacle for SMEs to innovate because too high-interest rates are severe obstacles in undertaking innovation projects (Galia and Legros, 2004; Savignac, 2008).…”

Section: Literature Reviewmentioning

confidence: 99%

“…In this case, the success of a business is partly determined by responsiveness and adaptation to technological innovation. Successful innovation depends on the ability to combine a range of central elements, including being able to access funding, understanding market needs and economic conditions, recruiting highly skilled staff, building business networks and the ability to get government support (Madrid‐Guijarro et al , 2009; Mohnen and Röller, 2005; Raffo et al , 2000; Rauch et al , 2017; Chundakkadan and Sasidharan, 2019).…”

Section: Introductionmentioning

confidence: 99%

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Barriers to technological innovations of SMEs: how to solve them?

Indrawati

Caska

Suarman

2020

IJIS

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Purpose This study aims to analyze the inhibiting factors of small and medium enterprises (SMEs’) technology innovation, supporting institutions for SMEs technology innovation development, SMEs’ technology innovation development model and strategies for developing SMEs in technology innovation. Design/methodology/approach This is a mixed-method research project conducted through a survey of SMEs in Riau Province, Sumatera Indonesia (primarily in the districts of Siak, Kampar and Pelalawan) from April to July 2019. SMEs that have been operating for at least five years were chosen purposively as samples. Based on the requirement, there are 277 entities used in this study. A focus group discussion (FGD) was also conducted to formulate SME models and development strategies in technological innovation. In addition, in-depth interviews and observations were also carried out on technological innovations undertaken by respondents. Findings It was found that there are five inhibiting factors of SMEs’ technology innovation: government support, quality of human resources, funding of technological innovation, economic conditions and business partners. The biggest inhibiting factor remains to be the funding of technological innovation. Therefore SMEs provide independent technological innovation costs to develop technological innovations for business sustainability. Supporting institutions for developing SME technology innovation consist of government institutions, private institutions, financial institutions (banks) and nonbank financial institutions. To survive and excel amid competition, SMEs need to pay attention to technological innovation. The business strategy that needs to be done is to improve services to consumers and improve their attitude toward innovation in the implementation and development of SMEs’ businesses. Research limitations/implications This research is limited to research on the inhibiting factors for SME technology innovation from the aspect of the production sector. This research has not studied various business fields in the trade, service and digital SME sectors. Future studies can reveal factors inhibiting SME technological innovation, except production aspects and various SME business fields. In addition, this study has not analyzed the cost of technological innovation provided by SMEs. Therefore, future studies could also reveal the large costs of technological innovation provided by SMEs. Originality/value This research investigates barriers hindering the SMEs’ technological innovations in Southeast Asia, including Indonesia as a maritime country. It also formulates strategies to reduce the barriers to SME’s technological innovation and contributes to the development of knowledge of technological innovations in SMEs. Moreover, this paper involves investigating government support from a nonfinancial aspect. To the best of the authors’ knowledge, this aspect has not been much discussed by studies on innovation at SMEs till now.

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Section: Resultssupporting

confidence: 92%

Section: Literature Reviewmentioning

confidence: 99%

Section: Literature Reviewmentioning

confidence: 99%

Section: Introductionmentioning

confidence: 99%

See 2 more Smart Citations

Barriers to technological innovations of SMEs: how to solve them?

Indrawati

Caska

Suarman

2020

IJIS

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“…Additionally, Ma and Gao (1997) also studied that both financial and non-financial support of government empowers firms to strongly emphasize their innovative, economical, and financial performance. Chundakkadan and Sasidharan (2020) used reported data and determined that the path between financial resources and innovation is significantly strengthened by the non-financial support of the government. They also demonstrated that firms with government support have a higher level of innovation as compared to firms with a lack of or no governmental support.…”

Section: Moderating the Role Of Government Supportmentioning

confidence: 99%

Supportive tactics for innovative and sustainability performance in emerging SMEs

Ullah

Anwar

et al. 2021

Financ Innov

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For this research, we examined the influence of access to domestic and international financing on sustainability performance with a mediating role of innovative performance and a moderating role of access to government support. Data were collected from 317 small and medium-sized enterprises (SMEs) through structured questionnaires. The results indicated that access to domestic and international financing significantly contributes to sustainability and innovative performances. Accordingly, we found a partial mediating role of innovative performance between access to domestic financing and sustainability performance as well as between access to international financing and sustainability performance. Access to government support significantly moderates the relationship between access to domestic finances and innovative performance as well as between access to international finances and innovative performance. Practitioners and policymakers should encourage national and international financial institutions and banks to facilitate SMEs by lending them funds for innovative activities and sustainability performance. Moreover, the government should support SMEs, so that they can contribute to economic growth and the gross domestic product. The implications from these matters will be further discussed in this paper.

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Global value chains, financial constraints, and innovation

Elshaarawy

Ezzat

2022

Small Bus Econ

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This paper analyzes the effect of firms engaging in global value chains (GVCs) and suffering from financial constraints on innovation. To explore this relationship, this study relies on firm-level data from World Bank Enterprise Surveys (WBES) for 146 countries during the period between 2006 and 2020. The aim of this paper is to empirically link two literature strands, the one of GVC participation and that of financial constraints, and to examine their individual effects, in addition to the effect of their interaction on innovation. Extended probit model is used to account for the endogeneity problem that may arise when studying the effect of GVC participation and financial constraints on innovation, by using a set of instrumental variables. This paper controls for heterogeneity among firms (by country, region, and industry), firms’ characteristics, reverse causality, and sample selection. The results of this paper show that financial constraints impede firms’ probability of innovation even if the firm is participating in GVC. This means that the negative effects of financial constraints outweigh the positive effects of GVC participation on innovation.

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Financial constraints, government support, and firm innovation: empirical evidence from developing economies

Cited by 41 publications

References 44 publications

Barriers to technological innovations of SMEs: how to solve them?

Barriers to technological innovations of SMEs: how to solve them?

Supportive tactics for innovative and sustainability performance in emerging SMEs

Global value chains, financial constraints, and innovation

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