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Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy

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  • John Hutchinson
  • Ana Xavier

Abstract

In this paper we compare the role of internal finance on the growth of firms between a leading transition country, Slovenia and an established market economy, Belgium. We find that firms in Slovenia are more sensitive to internal financing constraints than their Belgian counterparts. Furthermore, we find that de novo firms and firms with long term debt are most constrained and that micro and SMES can face great difficulties in accessing external sources of finance. Foreign firms, however, are able to raise external finance and consequently their growth is less reliant on the availability of internal finance. Our findings appear to indicate that although Slovenian firms are no longer recipients of soft budget constraints, the financial environment is not yet fully functional. Copyright Springer 2006

Suggested Citation

  • John Hutchinson & Ana Xavier, 2006. "Comparing the Impact of Credit Constraints on the Growth of SMEs in a Transition Country with an Established Market Economy," Small Business Economics, Springer, vol. 27(2), pages 169-179, October.
    • Handle: RePEc:kap:sbusec:v:27:y:2006:i:2:p:169-179
    DOI: 10.1007/s11187-005-4412-3
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    References listed on IDEAS

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    1. Klapper, Leora & Sarria-Allende, Virginia & Sulla, Victor, 2002. "Small and medium size enterprise financing in Eastern Europe," Policy Research Working Paper Series 2933, The World Bank.
    2. De Loecker, Jan & Konings, Jozef, 2006. "Job reallocation and productivity growth in a post-socialist economy: Evidence from Slovenian manufacturing," European Journal of Political Economy, Elsevier, vol. 22(2), pages 388-408, June.
    3. Gros, Daniel & Suhrcke, Marc, 2000. "Ten years after: What is special about transition countries?," HWWA Discussion Papers 86, Hamburg Institute of International Economics (HWWA).
    4. Griliches, Zvi & Hausman, Jerry A., 1986. "Errors in variables in panel data," Journal of Econometrics, Elsevier, vol. 31(1), pages 93-118, February.
    5. repec:lic:licosd:11402 is not listed on IDEAS
    6. Hans Degryse & Abe De Jong, 2001. "Investment Spending in the Netherlands: Asymmetric Information or Managerial Discretion?," Working Papers of Department of Economics, Leuven ces0114, KU Leuven, Faculty of Economics and Business (FEB), Department of Economics, Leuven.
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    More about this item

    Keywords

    financial constraints; manufacturing; transition economics; G33; P2; L6;
    All these keywords.

    JEL classification:

    • G33 - Financial Economics - - Corporate Finance and Governance - - - Bankruptcy; Liquidation
    • P2 - Political Economy and Comparative Economic Systems - - Socialist and Transition Economies
    • L6 - Industrial Organization - - Industry Studies: Manufacturing

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