Small Business Economics

, Volume 14, Issue 1, pp 37–53 | Cite as

The Provision of Finance to Innovation: A Survey Conducted among Italian Technology-based Small Firms

  • Giancarlo Giudici
  • Stefano Paleari

Abstract

Financial constraints to the development of innovation are often considered one of the main impediments to high-technology firms seeking to expand and grow. In particular this is the case of small and medium size high-tech firms. In the U.S. and the U.K. a variety of sources of finance are available to the start-ups of innovative firms; in the other European countries, and particularly in Italy, these means are still uncommon so that the development of technology is often prevented. This paper, based on an empirical analysis on a survey of 46 small high-tech Italian firms, aims at exploring the problems experienced by small businesses in gaining access to debt and equity finance. The results highlight that traditional financial sources are inadequate to finance innovative projects. The questioned firms rely mainly on personal finance, and secondly on short term bank debt; they are truly involved in maintaining control over the firm activities and are willing to issue outside equity only if the new investors also provide non financial competencies. Among the 46 interviewed firms, only 10 are willing to be listed in the future on small firms' stock markets.

Preview

Unable to display preview. Download preview PDF.

Unable to display preview. Download preview PDF.

References

  1. Acs, Z. J. and D. B. Audretsch, 1990, Innovation and Small Firms, Cambridge: MIT Press.Google Scholar
  2. AIFI, 1997, Capitale per lo sviluppo. Merchant banking, venture capital, fondi chiusi: un quadro internazionale, Milano: Guerini ed Associati.Google Scholar
  3. Archibugi, D., 1988, ‘Alla ricerca di una misurazione utile dell'innovazione tecnologica’, L'industria 2, 231–264.Google Scholar
  4. Audretsch, D. B. and M. Vivarelli, 1996, ‘Firm Size and R& D Spillovers: Evidence from Italy’, Small Business Economics 8, 249–258.Google Scholar
  5. Barry, C., 1994, ‘New Directions on Research on Venture Capital Finance’, Financial Management 23(3), 3–15.Google Scholar
  6. Bester, H., 1987, ‘The Role of Collateral in Credit Markets with Imperfect Information’, European Economic Review 31, 887–899.Google Scholar
  7. Binks, M., C. Ennew and C. Reed, 1992, ‘Information Asymmetries and the Provision of Finance to Small Firms’, International Small Business Journal 11(1), 35–46.Google Scholar
  8. Binks, M. and C. Ennew, 1996, ‘Growing Firms and the Credit Constraint’, Small Business Economics 8, 17–25.Google Scholar
  9. Brealey, R. and S. Myers, 1993, Principles of Corporate Finance, Milano: McGraw Hill.Google Scholar
  10. Bullock, M., 1983, Academic Enterprise, Industrial Innovation and the Development of High Technology Financing in the United States, London: Brand Brother & C.Google Scholar
  11. Butchart, R., 1987, ‘A New U.K. Definition of High Technology Industries’, Economic Review 400.Google Scholar
  12. Caprio, L. and M. Spisni, 1994, ‘Il capitale di rischio come leva per lo sviluppo delle PMI’, Piccola Impresa/Small Business 2, 61–85.Google Scholar
  13. Carlesi, A., 1990, Il problema del finanziamento nell'economia della nuova impresa, Torino: Giappichelli.Google Scholar
  14. Della Bella, C., 1993, ‘Investimenti in attività immateriali e strutture finanziarie aziendali’, Sinergie 30, 78–87.Google Scholar
  15. Dessy, A. and J. Vender, 1996, Capitale di rischio e sviluppo dell'impresa, Milano: EGEA.Google Scholar
  16. ENEA, 1992, Le imprese italiane nel settore dell'alta tecnologia: analisi delle distribuzioni territoriali, Direzione Studi ENEA, Progetto IOTA.Google Scholar
  17. ENEA, CESPRI-Bocconi and Politecnico di Milano, 1995, L'Italia nella competizione tecnologica internazionale, Milano: Franco Angeli.Google Scholar
  18. European Commission, 1994, Research into the Financing of New Technology Based Firms (NTBFS), Paris: Final report.Google Scholar
  19. EVCA and Ernst & Young, 1997, A Survey of Venture Capital 52 Giancarlo Giudici and Stefano Paleari and private equity in Europe: 1997 Yearbook, Bruges: Vanden Broele International.Google Scholar
  20. De Meza, D. and C. Southey, 1996, ‘The Borrowers Curse: Optimism Finance and Entrepreneurship’, Ecomic Journal 106 (435), 375–386.Google Scholar
  21. Donaldson, G., 1961, Corporate Debt Capacity: A Study of Corporate Debt Policy and the Determination of Corporate Debt Capacity, Harvard Business School, Division of Research.Google Scholar
  22. Florida, L. and M. Kenney, 1988, ‘Venture Capital-financed Innovation and Technological Change in the U.S.A.’, Research Policy 17, 119–137.Google Scholar
  23. Fried, V. and R. Hisrich, 1995, ‘The Venture Capitalist: A Relationship Investor’, California Management Review 37(2), 101–113.Google Scholar
  24. Gompers, P., 1995, ‘Optimal Investment, Monitoring and the Staging of Venture Capital’, Journal of Finance 5(5), 1461–1489.Google Scholar
  25. Griliches, Z., 1990, ‘Patent Statistics as Economic Indicators: A Survey’, Journal of Economic Literature 28, 1661–1707.Google Scholar
  26. Hunsdiek, D. and H. Albach, 1988, ‘Financing the Start-up and Growth of NTBFs in Germany’, in New Technology Based Firms in Britain and Germany, Anglo-German Foundation.Google Scholar
  27. Jensen, M. and W. Meckling, 1976, ‘Theory of the Firm: Managerial Behaviour, Agency Cost and Capital Structure’, Journal of Financial Economics 3, 305–360.Google Scholar
  28. Landström, H., 1987, Utvecklingsförlopp och finansielt hand-lande i innovationsbaserade företag, Lund, Department of Industrial Organization and IMIT.Google Scholar
  29. Karlsson, C. and O. Olsson, 1998, ‘Product Innovation in Small and Large Enterprises’, Small Business Economics 10, 31–46.Google Scholar
  30. Kulicke, M., 1987, Technologieorientierte Unternehmen in der Bundesrepublik Deutschland: Eine empirische Untersuchung der Strukturbildungs - und Wachstumsphase von Neugründungen, Frankfurt.Google Scholar
  31. Malerba, F., S. Torrisi and C. Bussolati, 1997, Il sistema industriale italiano e l'alta tecnologia, Bologna: Il Mulino.Google Scholar
  32. Manigart, S. and C. Struyf, 1997, ‘Financing High-technology Start-up in Belgium: An Explorative Study’, Small Business Economics 9, 125–135.Google Scholar
  33. Myers, S., 1984, ‘The Capital Structure Puzzle’, Journal of Finance 3.Google Scholar
  34. Myers, S. and N. Majluf, 1984, ‘Corporate Financing and Investment Decisions when Firms have Information that Investors do not Have’, Journal of Financial Economics 13, 187–221.Google Scholar
  35. Moore, B., 1994, ‘Financial Constraint to the Growth and Development of Small High Technology Firms’, in A. Hughes and D. Storey (eds.), Finance and the Small Firms, London: Routledge.Google Scholar
  36. Oakey, R., 1995, High Technology New Firms: Variable Barriers to Growth, London: Paul Chapman Publishing Ltd.Google Scholar
  37. OCSE, 1988, La mesure de la haute technologie. Méthodes existantes et améliorations possible, Direction de la Science, de la Technologie et de l'Industrie, DSTI/SPR 43(88), Paris.Google Scholar
  38. OECD, 1996, Venture Capital and Innovation, Working Group on Innovation and Technology Policy, doc. OCDE/GD (96) 168.Google Scholar
  39. Pencarelli, T. and L. Dini, 1995, ‘Teoria della struttura finanziaria e piccola impresa’, Piccola Impresa/Small Business 3, 47–85.Google Scholar
  40. Petrella, G., 1997, I nuovi secondi mercati europei: valutazione di convenienza alla quotazione per una PMI, Milano: EGEA.Google Scholar
  41. Pivato, S., 1997, Lo stato dell'arte dei secondi mercati in Europa, Atti del convegno ‘La quotazione delle PMI e i nuovi secondi mercati europei’, Università Bocconi, 8/7/97.Google Scholar
  42. Raffa, M., 1995, ‘Il ruolo delle piccole imprese innovative’, L'industria 2, 253–279.Google Scholar
  43. Reid, G., 1996, ‘Fast Growing Small Entrepreneurial Firms and Their Venture Capital Backers: An Applied Principal Agent Analysis’, Small Business Economics 8, 235–248.Google Scholar
  44. Rothwell, R., 1989, ‘Small Firms, Innovation and Industrial Change’, Small Business Economics 1, 21–38.Google Scholar
  45. Sandri, S., 1994, ‘Il venture capital come strumento di finanziamento delle piccole imprese’, Piccola Impresa/Small Business 2, 87–99.Google Scholar
  46. Santarelli, E. and A. Sterlacchini, 1990, ‘Innovation, Formal vs. Informal R& D, and Firm Size: Some Evidence from Italian Manufacturing Firms’, Small Business Economics 2, 223–228.Google Scholar
  47. Scanagatta, G., 1997, Scritti di finanza e di politica industriale per le PMI, Milano: CEDAM.Google Scholar
  48. Stiglitz, J. and A. Weiss, 1981, ‘Credit rationing in the Market with Imperfect Information’, American Economic Review 73, 393–409.Google Scholar
  49. Storey, D. J. and B. S. Tether, 1998, ‘New Technology-based Firms in the European Union: An Introduction’, Research Policy 26, 933–946.Google Scholar
  50. Sutton, J., 1996, Sunk Costs and Market Structure, Cambridge: MIT Press.Google Scholar
  51. Tether, B. S. and D. J. Storey, 1998, ‘Smaller Firms and Europe's High Technology Sectors: A Framework for Analysis and Some Statistical Evidence’, Research Policy 26, 947–972.Google Scholar
  52. Urban, A. and K. Arnold, 1993, Austrian National Accompanying Programmes to EC-RTE Programmes and for the Stimulation of International Technology Co-operations, VTÖ.Google Scholar
  53. Van Dijk, B., R. den Hertog, B. Menkveld and A. R. Thurik, 1997, ‘Some New Evidence on the Determinants of Largeand Small-Firm Innovation’, Small Business Economics 9, 335–343.Google Scholar
  54. Westhead, P. and D. J. Storey, 1997, ‘Financial Constraints on the Growth of High-tech Small Firms in the U.K., Applied Financial Economics 7, 197–201.Google Scholar
  55. Willamson, O., 1988, ‘Corporate Finance and Corporate Governance’, The Journal of Finance 3.Google Scholar
  56. Zara, C., 1996, Il finanziamento alla nascita e allo sviluppo delle imprese indipendenti a base tecnologica, Working paper no. 135, Milano: SDA Bocconi.Google Scholar

Copyright information

© Kluwer Academic Publishers 2000

Authors and Affiliations

  • Giancarlo Giudici
    • 1
  • Stefano Paleari
    • 2
  1. 1.Università degli Studi di BergamoDalmine (BG)Italy
  2. 2.Dipartimento di Economia e ProduzionePolitecnico di MilanoMilanoItaly

Personalised recommendations