Advertisement

Journal of Economics

, Volume 105, Issue 3, pp 199–224 | Cite as

Firm heterogeneity, credit constraints, and endogenous growth

  • Jürgen AntonyEmail author
  • Torben Klarl
  • Alfred Maußner
Article

Abstract

This paper is in general concerned with the role of firm heterogeneity for economic growth. We focus on heterogeneous productivity in innovation and credit constraints of firms within a semi-endogenous growth model reflecting recent empirical findings on firm heterogeneity. Our model allows for an explicit solution for transitional growth and for the balanced growth path level of innovations or ideas. The model predicts an optimal degree of heterogeneity in the presence of an endogenous firm distribution. This enables us to draw inference about the impact of key policy parameters of the model on these quantities and to draw conclusions about firm and capital market related policies.

Keywords

Firm heterogeneity Credit constraints Firm size SME Economic growth 

JEL Classification

E5 O31 O38 

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Acs ZJ, Audretsch DB (1987) Innovation in large and small firms. Econ Lett 23: 109–112CrossRefGoogle Scholar
  2. Acs ZJ, Audretsch DB (1988) Innovation in large and small firms: an empirical analysis. Am Econ Rev 78: 678–690Google Scholar
  3. Acs ZJ, Audretsch DB (1990) Innovation and small firms. MIT Press, CambridgeGoogle Scholar
  4. Acs ZJ, Audretsch DB (1991) R&D, firm size, and innovative activity. In: Acs ZJ, Audretsch DB (eds) Innovation and technological change: an international comparison. Harvester Wheatsheaf, New YorkGoogle Scholar
  5. Aghion P, Howitt P (1992) A model of growth through creative destruction. Econometrica 60: 323–351CrossRefGoogle Scholar
  6. Aghion P, Howitt P (1998) Endogenous growth theory. MIT Press, New YorkGoogle Scholar
  7. Aghion P, Bond S, Klemm A, Marinescu I (2004) Technology and financial structure: are innovative firms different?. J Eur Econ Assoc 2: 277–288CrossRefGoogle Scholar
  8. Aghion P, Fally T, Scarpetta S (2007) Credit constraints as a barrier to the entry and post-entry growth of firms. Econ Policy 52: 731–779CrossRefGoogle Scholar
  9. Almeida H, Campello M (2004) Financial constraints, asset tangibility, and corporate investment. Rev Financ Stud 20: 1429–1460CrossRefGoogle Scholar
  10. Altman EI, Sabato G (2005) Effects of the new basel capital accord on bank capital requirements for SMEs. J Financ Serv Res 28: 15–42CrossRefGoogle Scholar
  11. Angelini P, Generale A (2008) On the evolution of firm size distributions. Am Econ Rev 98: 426–438CrossRefGoogle Scholar
  12. Audretsch DB (2007) From small business promotion to creating an entrepreneurial society. CESifo Forum 8(2): 3–6Google Scholar
  13. Audretsch DB, Keilbach MC (2004) Entrepreneurship and regional growth: an evolutionary interpretation. J Evol Econ 14: 605–616CrossRefGoogle Scholar
  14. Audretsch DB, Thurik AR (2001) Linking entrepreneurship to growth. OECD Science, Technology and Industry Working Papers 2001/2Google Scholar
  15. Ayyagari M, Demirgüc-Kunt A, Beck T (2007) Small and medium enterprises across the globe. Small Bus Econ 29: 415–434CrossRefGoogle Scholar
  16. Baldwin RE, Robert-Nicoud F (2008) Trade and growth with heterogeneous firms. J Int Econ 74: 21–34CrossRefGoogle Scholar
  17. Beck T, Demirgüç-Kunt A, Laeven L, Maksimovic V (2006) The determinants of financing obstacles. J Int Money Finance 25: 932–952CrossRefGoogle Scholar
  18. Berger AN (2006) Potential competitive effects of basel II on banks in SME credit markets in the United States. J Financ Serv Res 29: 5–36CrossRefGoogle Scholar
  19. Bernanke BS, Gertler M, Gilchrist S (1996) The financial accelerator and the flight to quality. Rev Econ Stat 78: 1–15CrossRefGoogle Scholar
  20. Bernanke BS, Gertler M, Gilchrist S (1999) The financial accelerator in a quantitative business cycle framework. In: Taylor JB, Woodford M (eds) Handbook of macroeconomics, 1st edn, vol 1, chap 21, pp 1341–1393Google Scholar
  21. Bertschek I, Entorf H (1996) On nonparametric estimation of the Schumpeterian link between innovation and firm size. Empir Econ 21: 401–426CrossRefGoogle Scholar
  22. BIS (2009) Strengthening the resilience of the banking sector. Bank for International Settlements, BaselGoogle Scholar
  23. Bond E, Tybout JR, Utar H (2008) Credit rationing, risk aversion and industrial evolution in developing countries. NBER Working Paper No. 14116Google Scholar
  24. Bound JC, Cummins C, Griliches Z, Hall BH, Jaffe A (1984) Who does R&D and who patents. In: Griliches Z R&D, patents and productivity. University Press, ChicagoGoogle Scholar
  25. Cabral LMB, Mata J (2003) On the evolution of the firm size distribution: facts and theory. Am Econ Rev 93: 1075–1090CrossRefGoogle Scholar
  26. Carree MA, Thurik AR (1998) Small firms and economic growth in Europe. Atl Econ J 26: 137–146CrossRefGoogle Scholar
  27. Cohen WM, Klepper S (1996) A reprise of size and R&D. Econ J 106: 925–951CrossRefGoogle Scholar
  28. Cohen W, Levinthal D (1990) Absorptive capacity: a new perspective on learning and innovation. Adm Sci Q 35: 128–152CrossRefGoogle Scholar
  29. Cremer J, Sirbu M (1978) Une analyse econometrique de l’effort de recherché et developpement de l’industrie Francaise. Revue Economique 29: 940–954Google Scholar
  30. Czarnitzki D, Hottenrott H (2011) R&D investment and financing constraints of small and medium-sized firms. Small Bus Econ 36: 65–83CrossRefGoogle Scholar
  31. Dannreuther C (2007) EU SME policy: on the edge of governance. CESifo Forum 8(2): 7–13Google Scholar
  32. Devereux M, Schiantarelli F (1990) Investment, financial factors and cash flow from U.K. Panel Data. In: Hubbard G (ed) Information, capital markets and investment. University of Chicago PressGoogle Scholar
  33. EC (2010) Lisbon strategy evaluation document. Commission Staff Working Document, BrusselsGoogle Scholar
  34. ECB (2009) The Euro area bank lending survey—January 2009. European Central Bank, FrankfurtGoogle Scholar
  35. Entorf H (1988) Die endogene Innovation. Eine mikro-empirische Analyse von Produktphasen als Innovationsindikatoren. Jahrbücher für Nationalökonomie und Statistik 204: 175–189Google Scholar
  36. Gale D, Hellwig M (1985) Incentive-compatible debt contracts: the one-period problem. Rev Econ Stud 52: 647–663CrossRefGoogle Scholar
  37. Gertler M (1988) Financial structure and aggregate economic activity: an overview. J Money Credit Bank 20: 559–596CrossRefGoogle Scholar
  38. Gorodnichenko Y, Schnitzer M (2010) Financial constraints and innovation: why poor countries don’t catch up. CEPR Working Paper No. 7721Google Scholar
  39. Greenwald BC, Stiglitz JE (1987) Imperfect information, credit markets and unemployment. Eur Econ Rev 31: 444–456CrossRefGoogle Scholar
  40. Grunert J, Kleff V, Norden L, Weber M (2002) Mittelstand und Basel II: Der Einfluss der neuen Eigenkapitalvereinbarung für Banken auf die Kalkulation von Kreditzinsen. Zeitschrift für Betriebswirtschaft, ZfB, 10/2002, 1–20Google Scholar
  41. Hall BH, Jaffe A, Trajtenberg M (2005) Market value and patent citations. RAND J Econ 36: 16–38Google Scholar
  42. Helpman E, Itskhoki O, Redding S (2008) Wages, unemployment and inequality with heterogenous firms and workers. NBER Working Paper No. 14122Google Scholar
  43. Hurst E, Lusardi A (2004) Liquidity constraints, household wealth, and entrepreneurship. J Political Econ 112: 319–347CrossRefGoogle Scholar
  44. Idson TL, Oi WY (1999) Workers are more productive in large firms. Am Econ Rev 89: 104–108CrossRefGoogle Scholar
  45. Jacobson T, Lindé J, Roszbach K (2005) Credit risk versus capital requirements under Basel II: are SME loans and retail credit really different?. J Financ Serv 28: 43–75CrossRefGoogle Scholar
  46. Jones CI (1995) R&D-based models of economic growth. J Political Econ 103: 759–784CrossRefGoogle Scholar
  47. Jones CI (1999) Growth: with or without scale effects?. Am Econ Rev: Papers Proc 89: 139–144CrossRefGoogle Scholar
  48. Jones CI (2005) Growth and ideas. In: Aghion P, Durlauf S (eds) Handbook of economic growth. North-HollandGoogle Scholar
  49. Jousten A (2007) SMEs and the tax system: what is so different about them?. CESifo Forum 8(2): 14–20Google Scholar
  50. Klees S, Veldhues B (2008) Ausgewählte Ergebnisse für kleine und mittlere Unternehmen in Deutschland 2005. Statistisches Bundesamt—Wirtschaft und Statistik 3/2008Google Scholar
  51. Klette TJ, Kortum S (2004) Innovating firms and aggregate innovation. J Political Econ 112: 986–1018CrossRefGoogle Scholar
  52. Lelarge C, Sraer D, Thesmar D (2010) Entrepreneurship and credit constraints: evidence from a French loan guarantee program. In: Lerner J, Schoar A (eds) International differences in entrepreneurship. NBER Books, National Bureau of Economic Research IncGoogle Scholar
  53. Lotti F, Schivardi F (2005) Cross country differences in patent propensity: a firm-level investigation. Giornale degli Economisti e Annali di Economia 64: 469–502Google Scholar
  54. Luttmer GJ (2007) Selection, growth, and the size distribution of firms. Q J Econ 122: 1103–1144CrossRefGoogle Scholar
  55. Mata J (1996) Markets, entrepreneurs and the size of new firms. Econ Lett 52: 89–94CrossRefGoogle Scholar
  56. Michelacci C, Quadrini V (2005) Borrowing from employees: wage dynamics with financial constraints. J Eur Econ Assoc 3: 360–369Google Scholar
  57. Michelacci C, Quadrini V (2009) Financial markets and wages. Rev Econ Stud 76: 795–827CrossRefGoogle Scholar
  58. Musso P, Schiavo S (2008) The impact of financial constraints on firm survival and growth. J Evol Econ 18: 135–149CrossRefGoogle Scholar
  59. Nelson RR, Phelps ES (1966) Investment in humans, technological diffusion and economic growth. Am Econ Rev 56: 67–75Google Scholar
  60. Nelson RR, Winter SG (1973) Toward an evolutionary theory of economic capabilities. Am Econ Rev 63: 440–449Google Scholar
  61. OECD (2009) Turin Round Table Meeting on the impact of the global crisis on SME & entrepreneurship financing and policy responses. Chairs summary. http://www.oecd.org/dataoecd/36/27/42514077.pdf
  62. Pagano P, Schivardi F (2003) Firm size distribution and growth. Scand J Econ 105: 255–274CrossRefGoogle Scholar
  63. Papageorgiou C (2003) Imitation in a non-scale R&D growth model. Econ Lett 80: 287–294CrossRefGoogle Scholar
  64. Pavitt K, Robson M, Townsend J (1987) The size distribution of innovation firms in the UK: 1945–1983. J Ind Econ 35: 297–317CrossRefGoogle Scholar
  65. Peretto PF (1998) Technological change, market rivalry, and the evolution of the capitalist engine of growth. J Econ Growth 3: 53–80CrossRefGoogle Scholar
  66. Peretto PF (1999a) Cost reduction, entry, and the interdependence of market structure and economic growth?. J Monet Econ 43(1): 173–195CrossRefGoogle Scholar
  67. Peretto PF (1999b) Firm size, rivalry and the extent of the market in endogenous technological change. Eur Econ Rev 43(9): 1747–1773CrossRefGoogle Scholar
  68. Plehn-Dujowich J (2007) Innovation, firm size, and RDSearch. Econ Bull 12: 1–8Google Scholar
  69. Saurina J, Trucharte C (2004) The impact of Basel II on lending to small- and medium-sized firms: a regulatory policy assessment based on Spanish Credit Register Data. J Financ Serv Res 26: 121–144CrossRefGoogle Scholar
  70. Scellato G (2007) Patents, firm size and financial constraints: an empirical analysis for a panel of Italian manufacturing firms. Camb J Econ 31: 55–76CrossRefGoogle Scholar
  71. Townsend RM (1979) Optimal contracts and competitive markets with costly state verification. J Econ Theory 21: 265–293CrossRefGoogle Scholar
  72. Verspagen B (1999) Large firms and knowledge flows in the Dutch R&D system: a case study of Philips electronics. Technol Anal Strateg Manag 11: 211–233CrossRefGoogle Scholar
  73. Wagenvoort R (2003a) Are finance constraints hindering the growth of SMEs in Europe. EIB Pap 7: 22–50Google Scholar
  74. Wagenvoort R (2003b) SME finance in Europe: introduction and overview. EIB Pap 8: 10–20Google Scholar
  75. Yeaple SR (2005) A simple model of firm heterogeneity, international trade, and wages. J Int Econ 65: 1–20CrossRefGoogle Scholar

Copyright information

© Springer-Verlag 2011

Authors and Affiliations

  1. 1.CPB Netherlands Bureau for Economic Policy AnalysisThe HagueThe Netherlands
  2. 2.University of AugsburgAugsburgGermany

Personalised recommendations