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Cognitive financial constraints and firm growth

Author

Listed:
  • Jun Du

    (Aston University)

  • Bach Nguyen

    (University of Economics Ho Chi Minh City
    Aston University)

Abstract

This study distinguishes entrepreneurs’ cognitive financial constraints from financial supply constraints and assesses their relative importance to small business growth. Drawing from the literature on cognitive styles and institutional theory, we argue that small businesses’ financial constraints derive not only from financial market failures but also from the cognitive factors of entrepreneurs. Analysing a comprehensive dataset of more than 200,000 small businesses in Vietnam, we show that both financial supply and cognitive financial constraints impede firm growth. Given this significantly deleterious effect, the cognitive financial constraints originating from the demand side of firm financing deserve more attention.

Suggested Citation

  • Jun Du & Bach Nguyen, 2022. "Cognitive financial constraints and firm growth," Small Business Economics, Springer, vol. 58(4), pages 2109-2137, April.
    • Handle: RePEc:kap:sbusec:v:58:y:2022:i:4:d:10.1007_s11187-021-00503-7
    DOI: 10.1007/s11187-021-00503-7
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