Access to Finance - Innovation Relationship in Post-Transition

Innovation performance of most post-transition countries lags behind average EU performance. Inadequately developed financial sector that does not provide suitable financing to innovative firms can be damaging to the overall innovation activity in transition countries. The main focus of this paper is related to the predictors of access to finance difficulties in the aftermath of the economic crisis in post-transition countries. The empirical analysis is based on the Business Environment and Enterprise Performance Survey (BEEPS V) data for 30 post-transition countries. We estimate probability of considering access to finance as a business obstacle corrected for the decision to apply for financing employing Heckman selection estimation procedure. Results reveal that innovative firms are more likely to apply for financing, probably as a consequence of constrained internal resources. Older and larger firms as well as those that expect their business growth in the future are also more likely to apply for financing. At the same time, establishments belonging to a larger enterprise are less likely to apply for financing, probably due to available internal sources. Firms with female top management according to our estimates are less likely to apply for financing as well as small and micro firms. When it comes to perceptions on access to finance as an obstacle for doing business we have established that older and larger enterprises, private firms or those established as joint ventures (i.e. more oriented towards market principles) and those with positive expectations towards their future business activities are less likely to perceive access to finance as major obstacle. Whether an enterprise is innovative or not has no bearing on the perceptions of access to finance, after controlling for application to finance mechanism.