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on Small Business Management |
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Issue of 2025–09–08
twenty-two papers chosen by João Carlos Correia Leitão, Universidade da Beira Interior |
| By: | Dohse, Dirk; Fehrenbacher, Sophia |
| Abstract: | African innovators typically suffer from severe resource constraints and need to develop strategies to cope with these constraints. This paper focusses on external knowledge sourcing and, in particular, on the role of cooperation as a means to compensate for missing resources. Findings suggest that domestic inter-firm coop eration is of outstanding importance for firm-level innovation in Nigeria, whereas cooperation with other partners (research institutions, foreign firms, consultants, or the government) has no sizable impact on the innovative performance of Nigerian firms. Moreover, we show that it is in particular young firms and firms suffering from financial constraints that benefit from cooperation, whereas foreign-owned firms benefit less. Our findings contribute to a better understanding of the drivers of firm-level innovation in sub-Saharan Africa and have important implications for firm strategies and innovation policy |
| Keywords: | Resource-constrained innovation, Knowledge sourcing, Inter-firm cooperation, Coactive learning, Africa |
| JEL: | D22 L25 O32 O36 O55 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:ifwkie:323982 |
| By: | Yassin Allammari (UAE - Abdelmalek Essaadi University [Tétouan] = Université Abdelmalek Essaadi [Tétouan]); Ahmed Taqi (UAE - Abdelmalek Essaadi University [Tétouan] = Université Abdelmalek Essaadi [Tétouan]); Nadir El Morabit (UAE - Abdelmalek Essaadi University [Tétouan] = Université Abdelmalek Essaadi [Tétouan]) |
| Abstract: | Drawing on the Resource-Based View and the Dynamic Capabilities Theory, this study aims to investigate the effect of entrepreneurial orientation on small and medium-sized enterprises (SME) performance. Additionally, it examines the mediating role of market orientation and learning orientation in the relationship between entrepreneurial orientation and SME performance. Finally, the study explores the sequential mediation effect of market orientation and learning orientation between entrepreneurial orientation and SME performance to understand how the joint mobilization of these strategic resources transforms entrepreneurial actions into superior organizational performance. This study adopts a quantitative approach, using convenience-based non-probability sampling to collect data from 113 managers of Moroccan SMEs operating across various sectors. The collected data are analyzed using Partial Least Squares Structural Equation Modeling (PLS-SEM) to test the proposed hypotheses. The results indicate that entrepreneurial orientation has a positive and significant direct effect on the performance of Moroccan SMEs. Furthermore, market orientation partially mediates the relationship between entrepreneurial orientation and SME performance. However, the mediating effect of learning orientation was found to be non-significant in the link between entrepreneurial orientation and SME performance. Finally, the study found the existence of a sequential mediation effect exerted by market orientation and learning orientation in the relationship between entrepreneurial orientation and SME performance. This study is the first to explore the sequential mediating role exercised jointly and successively by market orientation and learning orientation in the relationship between entrepreneurial orientation and SME performance. Notably, the entrepreneurial orientation of SME in Morocco has not been previously studied, offering a valuable contribution to the literature on emerging economies, which remains underexplored in entrepreneurial orientation research. Lastly, a surprising result emerges compared to previous studies: learning orientation does not play a mediating role between entrepreneurial orientation and performance, thus challenging the universality of this mechanism and opening new avenues for research into contextual factors, particularly in SMEs of developing countries. |
| Keywords: | Entrepreneurial Orientation, Market Orientation, Learning Orientation, Sequential Mediation, SME Performance, Structural Equation Modeling |
| Date: | 2025–06–25 |
| URL: | https://d.repec.org/n?u=RePEc:hal:journl:hal-05199204 |
| By: | Marc-Andreas Muendler; James E. Rauch; Sergio Mikio Koyama |
| Abstract: | We consider founders of limited liability firms who previously held jobs in the formal sector of Brazil. Managers are five percent of former job holders but their startups account for 27 percent of new firm employment. Relatively little of their overrepresentation as founders or the larger size of their startups is explained by their previous wages or other standard human capital variables. Among non-managerial former occupations we examined those clearly connected to demand (sales) and to supply (technology, purchasing). Only purchasing was comparable to managerial occupations in entrepreneurship and new firm size. Further examination suggests that a key to greater entrepreneurship and larger initial firm size is that workers’ former jobs entailed building relationships with other businesses: in demand-side occupations, they sold to other businesses; in supply-side occupations, they bought from other businesses. |
| JEL: | J62 L25 L26 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34158 |
| By: | Manabu Furuta (Graduate School of Economics, Kobe University) |
| Abstract: | This study evaluates the effectiveness of government financial support for small and medium-sized enterprises (SMEs) in Japan during the COVID-19 pandemic. The Japanese government implemented various programs to support SMEs facing financial distress, leading to a notable decline in bankruptcies. We find that SMEs with strong ties to main banks and exporters were more likely to receive support, while subsidiaries or affiliates of large corporations were less likely to benefit. Although prior studies suggest that such policies may encourage "zombie" firms, our analysis shows that in the manufacturing sector, financial assistance fostered investment. JEL Classification: D22; D25; L52 |
| Keywords: | SMEs; COVID-19; Financial Support; PSM-DID |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:koe:wpaper:2518 |
| By: | Luca Fontanelli; Mauro Napoletano; Angelo Secchi |
| Abstract: | We revisit the size-volatility relationship in firm growth using administrative data on French manufacturing firms. Departing from the log-log linear decay commonly reported by other studies, we find a two-regime pattern: volatility declines steeply with size for small firms, but flattens for larger ones. We relate this new fact to the presence of resources misallocation as captured by imperfect correlation between size and productivity at the firm level. To explain the nexus between these two facts, we develop a stochastic model where firms face a number of risky business opportunities for which they compete. Two key features characterize this competition process. First, larger firms are more intensively exposed to competition dynamics. Second, firms with higher productivity are more likely to see business opportunities turning into positive, rather than negative, growth episodes. We analytically show that only when the correlation between firm size and productivity is lower than 1 the model is able to reproduce the volatility scaling we observed in the data. Simulations suggest that finite sample approximations of our asymptotic result are satisfactory in a reasonable portion of the parameter space. We conclude showing that in France industries populated by firms with higher correlation between size and productivity are associated with steeper average size-volatility decays consistent with the model's main prediction. Our findings suggest that the existence of resources misallocation, shaping the size-volatility relation, affects the relevance of the granularity channel in explaining aggregate fluctuations (Gabaix, 2011). |
| Keywords: | volatility scaling, granularity, resource allocation |
| Date: | 2025–09–02 |
| URL: | https://d.repec.org/n?u=RePEc:ssa:lemwps:2025/27 |
| By: | Bairy, Gaurav Gopal; Raj, Prateek; Yayavaram, Sai |
| Abstract: | Productivity spillovers between firms are frequently viewed as an important source of firm productivity enhancement. In this study, we focus on vertically linked inter-industry spillovers and examine their two key characteristics: asymmetry between forward (upstream) and backward (downstream) spillovers and heterogeneity among firms in leveraging such spillovers. We estimate productivity of Indian firms using firm-level data and use Input-Output tables to identify vertical linkages at the industry level. Our findings show that productivity spillovers from upstream industries benefit all firms whereas spillovers from downstream industries primarily benefit productive firms. Furthermore, the impact of forward spillovers is higher for firms operating in less competitive industries and lower for foreign firms. These heterogeneous spillover effects are likely to slow convergence in firm productivity, providing additional justification for the persistence of firm-level differences in productivity levels. |
| Keywords: | productivity spillovers, vertical linkages, firm heterogeneity, industry competition, firm ownership |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:cbscwp:324651 |
| By: | Fulvio Castellacci; Emil Evenhuis; Koen Frenken |
| Abstract: | The geography of innovation has focused on the roles of innovation for regional development understood in terms of income growth, productivity, and job creation. We propose a broader view on regional development using the framework of wellbeing developed in other disciplines. Following this perspective, we outline the possible roles and pathways through which innovation can contribute to well-being at various spatial scales and how, in turn, normative-political considerations regarding well-being provides directionality in innovation (policy) processes at spatial scales. |
| Keywords: | innovation, well-being, inequality, region, directionality |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2529 |
| By: | Amir Sariri; Evgenia Gatov; Geneva Neal; Kyle Robinson; Sonia Sennik; Wei Yang Tham; Michael Vertolli; Avi Goldfarb |
| Abstract: | We introduce a new dataset built from a global non-profit startup program for early-stage high-technology startups called Creative Destruction Lab (CDL). The early stages of startup formation remain one of the least understood aspects of firm growth. The nature of this program and the data collected from its operations are well suited to investigate open questions in entrepreneurial strategy, entrepreneurial finance, advice, and technology transfer. This dataset combines three critical features for rigorous empirical research. First, the large, multi-year sample includes roughly 15, 000 applicants, 9, 000 founders in admitted startups, and nearly 2, 000 mentors. Second, CDL recognized the academic value from the outset and built enterprise IT linking venture-level characteristics, structured longitudinal records of firm development and operations, and unstructured verbatim transcripts of mentor–founder discussions. Third, the data cover 27 technological domains such as therapeutics and quantum computing. This paper provides an overview of the setting from which data is collected, a high-level description of available data, and information on how to access these data for research. |
| JEL: | G24 L26 O3 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34127 |
| By: | Torben Klarl (University of Bremen, Indiana University Bloomington); Alexander S. Kritikos (DIW Berlin, University of Potsdam, GLO Essen, CEPA); Knarik Poghosyan (DIW Berlin) |
| Abstract: | While Equity Crowdfunding (ECF) platforms are a virtual space for raising funds, geography remains relevant. To determine how location matters for entrepreneurs using equity crowdfunding (ECF), we analyze the spatial distribution of successful ECF campaigns and the spatial relationship between ECF campaigns and traditional investors, such as banks and venture capitalists (VCs). Using data from the two leading German platforms – Companisto and Seedmacht – we employ spatial eigenvalue filtering and negative binomial estimations. In addition, we introduce an event study based on the implementation of the Small Investor Protection Act in Germany allowing us to obtain causal evidence. Our combined analysis reveals a significant geographic concentration of successful ECF campaigns in some, but not all, dense areas. ECF campaigns tend to cluster in dense areas with VC activity, while they are less prevalent in dense areas with high banking activity, and are rarely found in rural areas. Thus, rather than closing the so-called regional funding gap, our results suggest that, from a spatial perspective, ECF fills the gap when firms in dense areas seek external financing below the minimum equity threshold offered by VCs and when there are few banks offering loans. |
| Keywords: | Crowdfunding, Finance Geography, Entrepreneurial Finance, Venture Capital (VC) Proximity |
| JEL: | G30 L26 M13 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:pot:cepadp:91 |
| By: | Videnord, Josefin (Tillväxtanalys) |
| Abstract: | This paper explores how firm-specific trade opportunities affect R&D investments and innovative activities. To construct trade opportunities that are exogenous to firm-level decisions, I use the variation in export and import patterns and exploit the fact that firms differ in their product-country exporting (sourcing) patterns. Both export and import opportunities generate growth in terms of sales, value-added, overall employees, and high-skilled employees. Despite having similar effects on firm growth, the effects on innovation activities are very different for the two trade shocks. Export opportunities lead to more R&D investments (spending, employees, and intensity) and innovations (product and process). On the other hand, import opportunities show no effects on R&D investments, and the impact on product, process, and service innovation is negative. |
| Keywords: | R&D; Innovation; International; trade; Export; Import |
| JEL: | F10 F14 O31 O32 |
| Date: | 2025–08–29 |
| URL: | https://d.repec.org/n?u=RePEc:hhs:ifauwp:2025_014 |
| By: | Schmöller, Michaela; Goldfayn-Frank, Olga; Schmidt, Tobias |
| Abstract: | This paper provides novel empirical evidence on the impact of monetary policy on innovation investment using unique firm-level data. First, we document the ef- fect of a large, systematic monetary tightening (ECB rate increases from 0% to 4.5% during 2022-23), with average firm-level innovation cuts of 20%. These cuts persist over the medium term, indicating a sustained innovation slowdown. Second, we use the survey to identify elasticities of innovation expenditure to exogenous policy rate changes. Responses to hikes and cuts are significant and largely symmetric at the baseline rate (4.5%), though we detect potential state-dependent asymmetry due to the extensive margin. The financing channel emerges as one of the trans- mission channels, with more pronounced effects in firms with higher shares of bank loans and variable-rate loans. Crucially, we show that monetary policy transmits via aggregate demand, with stronger responses in firms with pessimistic demand expectations. Forward guidance provides substantial additional stimulus by re- ducing uncertainty about future rates, suggesting long-term, supply-side effects of announcements. These results challenge monetary long-run neutrality and are sug- gestive of policy endogeneity of R∗ operating through innovation-driven technology growth. |
| Keywords: | Monetary Policy Transmission, R&D, Endogenous Growth, ForwardGuidance, R∗ |
| JEL: | E52 E22 E24 O30 D22 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:zbw:bubdps:324662 |
| By: | Billington, Stephen D. (Ulster University Business School, Ulster University); Colvin, Christopher L. (Queen’s Business School, Queen’s University Belfast); Coyle, Christopher (Queen’s Business School, Queen’s University Belfast) |
| Abstract: | We examine how the design of the patent system shapes firms’ access to finance. We exploit a UK reform that introduced substantive examination into the patent application process, improving the quality of information available to investors about the value of firms’ innovation. Using a newly compiled dataset of officially listed corporations, we find that firms with examined patents increased their borrowing, reflecting improved access to capital markets, which translated into firm growth. Our results highlight how patent examination can function as a screening mechanism that reduces information asymmetry, strengthens the signalling value of patents, and mitigates financial barriers to innovation. |
| Keywords: | firm finance, debt, innovation, patents, patent examination, signalling. JEL Classification: G32, N23, N43, O16, O31, O34 |
| Date: | 2025 |
| URL: | https://d.repec.org/n?u=RePEc:cge:wacage:767 |
| By: | Miguel Acosta-Henao; Maria Alejandra Amado; Montserrat Martí; David Perez-Reyna |
| Abstract: | This paper investigates the granular transmission of U.S. monetary policy shocks to deviations from the uncovered interest rate parity (UIPDs) in emerging economies. Using a comprehensive dataset from Chile that accounts for firm-bank relationships and the time-variant characteristics of both firms and banks, we uncover several key findings: (1) Shocks to the federal funds rate (FFR) increase banks’ costs of foreign borrowing. (2) These higher credit costs disproportionately affect small firms, raising their UIPDs more than for large firms. (3) This size-differentiated impact stems from the relatively higher interest rates on domestic currency loans faced by small firms. (4) In contrast, interest rates on dollar-denominated loans respond homogeneously across all firms. (5) We find no differential effect on loan quantities, suggesting an active role of credit supply and demand. We rationalize these findings with a small open economy model of corporate default that incorporates heterogeneous firms borrowing from domestic banks in both foreign and domestic currencies. In our model, a higher FFR reduces the marginal cost of defaulting on domestic-currency debt for small firms more than for large firms. |
| Date: | 2025–05 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1043 |
| By: | Cetin, Furkan |
| Abstract: | I examine how Accounting Standards Codification (ASC) 606 affects R&D alliance formations and innovation in the drug development industry. ASC 606 alters revenue recognition timing and increases disclosure requirements. I document that firms dependent on R&D alliance revenues accelerate revenue recognition and expand revenue-related disclosures following ASC 606 adoption. These concurrent changes reduce information asymmetry, both between firms and between managers and investors, but only when increased disclosure accompanies accelerated recognition. Consistent with these net reductions in information asymmetry, affected firms raise more equity capital and increase R&D investment. Notably, these firms, which historically acted as technology providers (principals), form more R&D alliances as technology acquirers (partners). Consequently, they exhibit higher innovation output, measured by new patents and drug candidates. This study identifies a specific mechanism through which accounting standards can stimulate innovation: reduced information asymmetry that facilitates strategic R&D alliance formation. |
| Keywords: | real effects; innovation; R&D Alliances; ASC 606; revenue recognition |
| JEL: | M40 |
| Date: | 2025–08–25 |
| URL: | https://d.repec.org/n?u=RePEc:ehl:lserod:129274 |
| By: | Zehra Usta; Martin Andersson; Katarzyna Kopczewska; Maria Kubara |
| Abstract: | A common proposition is that certain technologies play a catalytic role in regions by paving the way for the emergence of new related technologies, contributing to the development and diversification of technology clusters. This paper employs unsupervised machine learning algorithms with temporally informed association rule mining to identify catalytic patents in clusters in the UK. Using data spanning over 30 years (1980-2015) we show clear asymmetric relationships between patents. Some act as evident catalysts that drive future patent activity in clusters. The results point to a strong empirical relevance of asymmetric relatedness between patents in the development of clusters of technology. They also highlight the usefulness of machine learning algorithms to better understand the long-term evolution of clusters and show how temporally informed association rule mining can be used to analyses asymmetries in relatedness and to identify catalyst technologies. |
| Keywords: | clusters, innovation, cluster dynamics, technological relatedness, asymmetric relatedness, innovation catalysts, patents |
| JEL: | O31 O33 R12 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:egu:wpaper:2528 |
| By: | Keiichiro HONDA; Takuya KAWANISHI; Yusuke ADACHI |
| Abstract: | This study empirically examines the impact of increasing export activity of firms in regional cities on local businesses. National and local governments implement various policies to support firms and attract investment, aiming to promote exports and increase foreign direct investment (FDI) in Japan. While some firms have successfully expanded their markets, many local businesses remain unglobalized, limiting their growth. However, when firms expand through exports or FDI, they may form supply chains with local businesses, generating positive spillover effects on the regional economy. If such effects are confirmed, export promotion and FDI attraction policies could be even more effective than expected. Using microdata from Japanese manufacturing establishments aggregated at the municipality level, this study investigates the spillover effects of an increase in exporting establishments or export value on non-exporting establishments in the same municipality, focusing on their sales, employment, and wages per worker. |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:eti:rdpsjp:25019 |
| By: | Sarah Xue Dong; Agung Satyadini; Mathias Sinning |
| Abstract: | Tax compliance among small businesses remains low in developing countries, yet little is known about how regional context shapes the effectiveness of enforcement strategies. Both theory and evidence suggest an ambiguous relationship between compliance and geographic proximity to tax offices. We study this issue using a large-scale natural field experiment with Indonesia's tax authority involving 12, 000 micro, small, and medium enterprises (MSMEs). Businesses were randomly assigned to receive deterrence, information, or public goods letters, or no message. All letters improved compliance, with deterrence messages producing the largest gains - substantially increasing filing rates and raising monthly tax payments. Each dollar spent on deterrence letters generated about US$30 in additional revenue over the course of a year. We observe high compliance among non-treated MSMEs near metropolitan tax offices and find that enforcement messages successfully raise compliance in non-metropolitan regions to comparable levels. However, targeting already compliant MSMEs near metropolitan tax offices backfires, underscoring the need for geographically tailored tax administration strategies. These results provide novel experimental evidence on the relation between geographic proximity and the effectiveness of tax enforcement, helping to reconcile mixed findings in the tax compliance literature. |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:arx:papers:2509.02328 |
| By: | Jessica Birkholz; Susanna Bolz; Björn Jindra; Philip Kerner |
| Abstract: | Green hydrogen can play a major role in future net-zero energy systems. This paper investigates how existing technological and production capabilities can support the emergence and growth of green hydrogen value chains in Northern and Western Germany. Drawing on evolutionary economic geography, we argue that the development of the hydrogen value chain depends on the relatedness between existing knowledge bases and hydrogen technologies, and further recombinant capabilities, as well as the processes involved in acquiring capabilities. Our analysis focuses on seven NUTS 2 regions with favorable conditions for the development of hydrogen hubs, which are low cost of renewable energy production, access to hydrogen infrastructure, and political support for the hydrogen economy. We comparatively examine the regional capabilities using patent data to map technological innovation, firm-level data to identify key corporate actors, and regionalized export statistics to assess production capabilities. Based on our findings, we argue that the development of green hydrogen hubs might be facilitated by alignment between a region’s existing innovation capabilities, production capabilities, and hub specialization, with place-based policy approaches tailored towards each region’s unique profile. |
| Keywords: | Green hydrogen, Value chains, Regional capabilities |
| JEL: | O13 Q42 Q55 R11 |
| Date: | 2025–09 |
| URL: | https://d.repec.org/n?u=RePEc:atv:wpaper:2505 |
| By: | Jorge Fernández B.; Francisco Vásquez L. |
| Abstract: | Our study, which takes a novel approach by using administrative data from Chilean firms financed mainly by local banks in the Manufacturing and Commerce sectors, has uncovered significant findings. Between 2009 and 2019, we observed a quarterly change in bank debt that demonstrates a positive relationship with the change in sales and a negative relationship with the operating margin. This debt behavior is a direct response to the increased need for working capital financing when a firm experiences a surge in sales, and a decreased need for debt financing when the business margin is more substantial. This is a crucial first step in understanding the determinants of short-term financing decisions of Chilean firms financed mainly with banks, an area that has been relatively understudied in our country. Moving forward, it will be intriguing to delve into the implications of the massive delivery of Fogape-Covid credits starting in 2020. Initial data suggests a shift in the relationship between debt, sales, and margins, as the increase in financing was primarily concentrated in those companies experiencing a decline in sales. |
| Date: | 2024–12 |
| URL: | https://d.repec.org/n?u=RePEc:chb:bcchwp:1032 |
| By: | Wang, Maria; Kässi, Otto; Kuusi, Tero |
| Abstract: | Abstract This brief examines environmental and energy-related business subsidies in Finland and compares them with those in other EU countries. In Finland, subsidies are concentrated on tax concessions and preservation-oriented support for which there is limited amount of research, and the existing studies show limited effectiveness. By contrast, investment and innovation subsidies, which potentially have a greater potential to accelerate the green transition, make up a smaller share of the overall support. Internationally, Finland stands out with a high level of subsidies, but structurally it differs from, for example, Germany, where the emphasis is on direct investment support. The analysis suggests that redirecting subsidies from tax concessions towards conditional, impact-oriented instruments could better support permanent emission reductions, technological development and economic renewal. |
| Keywords: | Green transition subsidies, State subsidies, Environmental policy funding, Industrial policy |
| JEL: | H23 H25 H81 Q58 O38 |
| Date: | 2025–09–01 |
| URL: | https://d.repec.org/n?u=RePEc:rif:briefs:163 |
| By: | Ginger Zhe Jin; Mario Leccese; Liad Wagman; Yunfei Wang |
| Abstract: | We examine serial acquisitions in the technology sector from 2010 to 2023. Defining serial acquisitions based on a granular S&P industry taxonomy, we find that they account for 24–37% of majority-control tech M&A, with over half completed by public firms. Followon targets in a series are generally larger and older than the initial acquisition, and among public acquirers, starting a series is associated with higher market value and greater innovation value, but not with significant changes in market competitiveness. Among deals with valid transaction values, over half of serial deals exceed the reporting threshold of the U.S. Hart–Scott–Rodino (HSR) Act. However, in below-threshold acquisitions, acquirers primarily target their core business category. Accounting for the cumulative value of a series would, in most cases, keep the timing of HSR review unchanged or modestly accelerate it, but when it does accelerate it, review could occur several deals or years earlier, potentially yielding important benefits in markets with long acquisition sequences. Finally, while Google/Alphabet, Amazon, Facebook/Meta, Apple and Microsoft (GAFAM) stand out from the rest of the sample for more frequent serial acquisitions, some other large acquirers display similar patterns. |
| JEL: | G34 L10 L40 O38 |
| Date: | 2025–08 |
| URL: | https://d.repec.org/n?u=RePEc:nbr:nberwo:34178 |
| By: | Giuliana, Raffaele (ESRB); Reddan, Paul (European Commission) |
| Abstract: | We use credit registry data on lending to businesses in Ireland, a developed, small open economy, which has a significant share of new credit to firms provided by non-bank lenders. We assess whether lending from non-banks reacts more sensitively in comparison to banks to a tightening in financial conditions. We use a fixed effects approach to isolate credit supply effects and show that non-banks contract lending to a greater degree than banks in response to tightening financial conditions. We also highlight the critical importance of looking beyond the binary classification of banks versus non-banks when conducting analysis on how the increased role of non-banks in direct lending may affect financial stability. We show that asset finance providers and general lenders do not contract lending in response to a tightening in financial conditions, and instead increase credit supply in comparison to the banking sector. In contrast, specialist property lenders react negatively and strongly, contracting lending significantly in comparison to banks. |
| Keywords: | Non-Bank lending, financial conditions, credit supply, financial stability, non-bank financial Institutions, private credit, alternative lenders. |
| JEL: | G23 E44 E51 G21 E58 G01 E44 L20 |
| Date: | 2025–07 |
| URL: | https://d.repec.org/n?u=RePEc:cbi:wpaper:5/rt/25 |