How Small- and Medium-Sized Enterprise Innovation Affects Credit Accessibility: The Case of Vietnam

Abstract

Nowadays, small- and medium-sized enterprises play crucial roles in both developed and developing countries. They create new employment, fulfill the market gap, contribute to Gross Domestic Product and boost the whole economy. However, small- and medium-sized enterprises face more financial constraints than large enterprises, which prevent them from growing and expanding their activities. This paper aims to investigate how the innovation of small- and medium-sized enterprises impacts on credit accessibility in Vietnam from 2005 to 2015, through five aspects of innovation: new products, new technology, improved existing products, research and development investment, and machine innovation. The data set consists of more than 4500 observations of small- and medium-sized enterprises in Vietnam. This data set is taken from a survey conducted within the framework of cooperation among UNU-WIDER, the University of Copenhagen and Vietnamese government agencies. Using panel regression model, we found out that three out of five innovation factors significantly impact on credit accessibility. More specifically, research and development investment and new product have negative impact on credit accessibility; whereas new technology has positive impact on credit accessibility. These findings are useful for firm managers, banks and policy makers to help small- and medium-sized enterprises overcome financial constraints through innovation aspects.