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Innovation, SMEs and the liability of distance : the demand and supply of bank funding in UK peripheral regions

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BrownJEG_Innovation_Final_Accepted_Version_4_4_16.pdf (324.6Kb)
Date
01/2017
Author
Lee, Neil
Brown, Ross Crawford
Keywords
Finance
SMEs
Innovation
Thin Markets
Peripheral Regions
UK
HG Finance
3rd-NDAS
BDC
R2C
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Abstract
This paper considers geographical variations in the demand and supply of bank finance for innovative firms in the UK. It uses a detailed survey on the finances of almost 40,000 UK Small and Medium Sized Enterprises for 2011–2013 to investigate both the extent and type of applications for bank finance by innovative firms in peripheral regions, whether funders accept their applications and whether acceptance rates reflect objective criteria, such as credit scores, or their location. The paper finds evidence of higher demand for bank finance for innovative firms in peripheral areas, but that these firms are more likely to be discouraged from applying. However, there is strong evidence that innovative firms in peripheral regions are more likely to have their applications for finance rejected, even when controlling for factors such as credit score. The findings suggest that geography matters in the financing of innovative firms and firms in peripheral areas may suffer a “liability of distance” which potentially reinforces regional disparities. The implications of these findings for public policy are outlined.
Citation
Lee , N & Brown , R C 2017 , ' Innovation, SMEs and the liability of distance : the demand and supply of bank funding in UK peripheral regions ' , Journal of Economic Geography , vol. 17 , no. 1 , pp. 233-260 . https://doi.org/10.1093/jeg/lbw011
Publication
Journal of Economic Geography
Status
Peer reviewed
DOI
https://doi.org/10.1093/jeg/lbw011
ISSN
1468-2702
Type
Journal article
Rights
Copyright © 2016, the Authors. Published by Oxford University Press. This work is made available online in accordance with the publisher’s policies. This is the author created, accepted version manuscript following peer review and may differ slightly from the final published version. The final published version of this work is available at https://dx.doi.org/10.1093/jeg/lbw011
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  • University of St Andrews Research
URI
http://hdl.handle.net/10023/13294

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