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Refereed/Peer-reviewed We investigate the formal credit effect on firm level innovations of small and medium enterprises in developing economies. Using the instrumental regression method, we control for potential endogeneity in innovation and credit relationships. Results indicate that formal credit availability boosts all four types of innovations. However, this impact is more significant for soft innovations compared to hard innovations. The results also point to the importance of informal finance as a source of external finance for firms where capital markets suffer from imperfections. Our study encourages the development of policy around financing for various types of innovation, which is especially suited for developing economies.

The COVID-19 pandemic has resulted in substantial constraints for small and medium enterprises (SMEs) worldwide. The techniques in which SMEs handle recent crises and the degree to which environmental performance is advantageous when the marketplace experiences an adverse shock is fairly untouched in the literature. To assess this probability, we examine, using data from 6,597 SMEs in 13 developing countries, the effect of firm environmental efficiency on firm financing during the COVID-19 outbreak. We consider three aspects of external financing – bank, non-bank and trade credit – and suggest that it pays for firms to show devotion to environmental obligations in a global pandemic. Our research implies that the trust between a firm and its stakeholders, if it is based on environmental performance, pays off when the trust freefall during periods of shock and adversity.

Refereed/Peer-reviewed Financial inclusion (FI) provides significant possibilities for poverty alleviation. Information communication technology (ICT) is an essential component of any FI strategy aiming to enable access to a wide range of financial products and services. This study explores entrepreneurs’ assessments of the role of ICT for their FI and its effect in Africa. Using data for 1436 entrepreneurs, from the World Bank Enterprise Survey database and applying an inverse probability of treatment weighting (IPTW) based on propensity scores, the results of our study indicate that ICT increases entrepreneurs’ FI. In particular, we find that the average FI of entrepreneurs using ICT in their business is approximately 12% higher than their counterparts who do not use ICT. Further, separate treatments of email, website, and mobile phone, show that business website ownership has the highest impact on FI, followed by mobile phone and email. The results are robust through a series of robustness checks including the bivariate probit model, propensity score matching model, and alternative proxies for FI. Our findings confirm the significant role technological deepening plays in advancing FI in Africa, and its potential for wider applicability to other developing economies.

Refereed/Peer-reviewed Using a comprehensive dataset on unlisted firms in 22 developing countries this paper analyses the relationship between gender, microfinance and access to bank credit. Using heckprobit to control sample selection bias, we reveal evidence of discrimination against female-owned and female-led firms. Also, we find that a mechanism for microfinance to empower women is facilitating loan applications and loan approvals for female-owned firms. Our paper highlights the importance of addressing gender discrimination in the credit market in order to facilitate the development of female-owned firms.

Refereed/Peer-reviewed This paper explores the relationship between firm-level innovation and external finance for small and medium enterprises (SMEs). Our sample consists of 13,430 firms from Eastern Europe and Central Asian countries. A propensity score matching approach reports a positive relationship between formal finance and product and process innovation, which is greater for early-stage SMEs than for mature counterparts. However, informal finance has more significant impact on mature firms' product innovation. Our empirical evidence highlights policy implications for countries desiring to enhance the innovation of their SMEs by improving the external finance of these SMEs.

Refereed/Peer-reviewed In this study, we examine whether bribery impairs gender-based asymmetries in product/process innovation in developing economies. Based on firm-level data from Latin American countries, we reject the proposition that women behave differently with respect to bribing on the grounds of higher ethical/moral standards. After controlling for endogeneity and non-random treatment effects, we find that, in line with the Differential association and opportunity (DAO) theory, women in positions of influence (i.e., firm ownership and top management) are equally associated with firm-level bribing. Furthermore, the results indicate that women receive, on average, a greater payoff from bribing compared to male counterparts. At a practical level for firms wishing to innovate, the question of how to gain maximum advantage from each peso paid in bribes becomes an interesting amoral exercise. Our study reveals that promoting women into high-level positions on the basis of their superior morality is an ill-conceived presumption, which is not supported empirically.