Intellectual Capital Management as Support for Financing Innovation in SMEs.

SMEs face severe difficulties in accessing the external financing that supports their innovative activities. One important reason for this is that the innovative capacity of most SMEs is extensively based on intangibles and that there are no international or national standards for reflecting the value of these. This means that financial institutions are reluctant to include them in their risk analyses. The objective of this paper is to show how both SMEs and financial institutions can benefit from using a commonly agreed Intellectual Capital report for financing innovation activities. The paper is based on the results of 9 case studies with SMEs from various sectors, in which we partially applied the InCas (Intellectual Capital Statement made in Europe) methodology, developed within the 6th Framework Programme. The interviews enabled us to obtain information on 14 selected intangibles, regarding: a) their impact on each company's results; b) company satisfaction with both the quantity and quality of their stock; and c) the degree of systemized management taking into account the 48 indicators proposed by the InCas methodology. In parallel to this process, we conducted interviews with 5 Spanish financial institutions, both public and private, in order to assess the importance that each of the 48 intellectual capital indicators has for their risk analyses. The results from the case studies, which were also tested with a survey, show some interesting conclusions regarding: 1) how useful the methodology is for a company's internal management and as a complement for a financial institution in its risk analysis; 2) the patterns followed by intangibles management in the studied SMEs and its consequences. In addition to this, the study also shows that managing intangibles pays off in terms of productivity. [ABSTRACT FROM AUTHOR]