The impact of entrepreneurs’s financial literacy on innovation within small and medium-sized enterprises

Abstract

This article analyses the impact of an entrepreneur’s financial literacy upon innovation within small- and medium-sized enterprises (SMEs) and, in so doing, extends human capital theory to consider the effect of financial literacy on risky investment decisions. Using a large survey dataset of Chinese SMEs in 2015 and 2017, our findings suggest that financial literacy is positively associated with innovation; positive relationships are robust to different innovation metrics. In addition, we find that gender matters, as male owners appear to promote more innovations, while firm size is positively associated with innovation. Additional analysis suggests that risk tolerance is a transmission mechanism for the impact of financial literacy on innovation. Our results corroborate previous studies showing that individuals with greater financial literacy make sound personal financial decisions and so have important public policy implications.

SUSTAINABLE FINANCIAL PERFORMANCE BASED ON FINANCIAL LITERACY AND FINANCIAL INCLUTION WITH INNOVATION AS A MEDIATION VARIABLE ON BATIK MSMEs IN SRAGEN REGENCY

“…Financial literacysignificant effect on innovation.. These results support the research of Illmeyer, et al (2017) and Liu, et al (2020). The implication of this research is that the financial literacy variable increases the innovation of Batik UMKM in Sragen Regency, it is better for Batik UMKM in Sragen Regency to increase the ability to understand several existing business opportunities, with these opportunities it can increase sales so that it can be used for innovation from Batik UMKM.…”

Effects of financial literacy on graduate school attitudes amidst COVID‐19

“…First, we advance the literature on the causal effect of financial literacy on human capital investment. Our findings supplement the literature about the impact of financial literacy on investment, financial, and corporate decisions (e.g., Calcagno & Monticone, 2015; Hsiao & Tsai, 2018; Liu et al, 2021). To the best of our knowledge, our study is the first to investigate the role of financial literacy on human capital investments in terms of schooling.…”

Financial determinants of SMEs performance. Evidence from Kenya leather industry

“…Again, the upper echelons theory asserts that, top executives analyze situations based on their personalities, experiences, values and other human factors. This shows that, top executive personal attributes and believes affects the performance of the firm (Hambrick, 2007;Hambrick & Mason, 1984;Liu et al, 2021). Therefore, SMEs are more likely to be affected by leadership attributes, believes and experiences based on established norms and routines.…”

“…These financial factors are the crucial financial variables established to be significant among other factors influencing SMEs operation and growth in separate extant literature. Most importantly, these financial factors are recognized in literature to have a direct and immediate impact on the financial performances of businesses (García-Pérez-de-Lema et al, 2021;Liu et al, 2021;Oladejo, 2015;Tee et al, 2016).…”