Journal of Evolutionary Economics

, Volume 18, Issue 2, pp 135–149 | Cite as

The impact of financial constraints on firm survival and growth

  • Patrick Musso
  • Stefano Schiavo
Regular Article


We propose a new approach for identifying and measuring the degree of financial constraint faced by firms and use it to investigate the effect of financial constraints on firm survival and development. Using panel data on French manufacturing firms over the 1996–2004 period, we find that (1) financial constraints significantly increase the probability of exiting the market, (2) access to external financial resources has a positive effect on the growth of firms in terms of sales, capital stock and employment, (3) financial constraints are positively related with productivity growth in the short-run. We interpret this last result as the sign that constrained firms need to cut costs in order to generate the resources they cannot raise on financial markets.


Financial constraints Firm growth Firm survival 

JEL Classification

E44 G32 L25 



The authors blame each other for any remaining mistakes. They nevertheless agree on the need to thank Sylvain Barde, Flora Bellone, Jean-Luc Gaffard, Sarah Guillo, Evens Salies, and above all Lionel Nesta for useful comments and discussions.


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Copyright information

© Springer-Verlag 2007

Authors and Affiliations

  1. 1.GREDEG (CNRS) and CERAM Business SchoolUniversity of Nice-Sophia AntipolisValbonneFrance
  2. 2.Département de Recherche sur l’Innovation et la ConcurrenceObservatoire, Français des Conjonctures EconomiquesValbonneFrance

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