Credit constraints and exports of SMEs in emerging and developing countries
- 6 Downloads
We study the relationship between credit constraints and exports using a large and heterogeneous sample of small- and medium-sized firms from 65 emerging and developing countries between 2003 and 2014. We measure credit constraints by means of each firm’s self-assessment of whether it is credit-rationed, and we follow an instrumental variable approach that uses firm-level instruments to address the potential endogeneity of credit constraints with respect to export performance. We find robust evidence of a negative, statistically and economically significant effect of financial constraints on both the probability that a firm exports (the extensive margin) and the share of exports over total sales (the intensive margin). The impact on both margins of exports is stronger for small and young firms, and for those operating in countries where the financial system, the quality of institutions, and the overall level of economic freedom are less developed.
KeywordsExport behavior Export margins Small business financing Credit constraints
JEL ClassificationD22 F10 F14 F23 M21 L26
We would like to thank for comments and suggestions seminar participants at the University of Molise, and conference participants at the European Trade Study Group (2016), the Italian Trade Study Group (2016), the International Finance and Banking Society (2016), the International Economic Association (2017), and the Società Italiana degli Economisti (2017). Any remaining errors are our sole responsibility.
- Angrist, J., & Pischke, J. S. (2009). Mostly harmless econometrics: an empiricist’s companion. Princeton, N.J: Princeton University Press.Google Scholar
- Buch, C.M., Kesternich, I., Lipponer, A., & Schnitzer, M. (2010). Exports versus FDI revisited: does finance matter? Bundesbank Series 1 Discussion Paper No. 2010,03. Available at SSRN: https://ssrn.com/abstract=2785367.
- Buckley, P. J. (1989). Foreign direct investment by small-and medium-sized enterprises: The theoretical background. In The multinational enterprise (pp. 24–45). London: Palgrave Macmillan.Google Scholar
- Kaufmann, D., Kraay, A., & Mastruzzi, M. (2007). The worldwide governance indicators project: answering the critics. Policy Research working paper no. WPS 4149. Washington, DC: World Bank. Available at: http://documents.worldbank.org/curated/en/979231468178138073/The-worldwide-governance-indicators-project-answering-the-critics.
- Krasniqi, B. A., & Desai, S. (2017). Institutions and export performance in 26 transition economies. In Entrepreneurship in transition economies (pp. 57–73). Cham: Springer.Google Scholar
- Melitz, M. J. (2003). The impact of trade on intra-industry reallocations and aggregate industry productivity. Econometrica, 71(6), 1695–1725.Google Scholar
- Minetti, R., Murro, P., Rotondi, Z., & Zhu, S. C. (2017). Financial constraints, firms’ supply chains, and internationalization. Journal of the European Economic Association. https://doi.org/10.1093/jeea/jvx056.
- Mol-Gómez-Vázquez, A., Hernández-Cánovas, G., & Koëter-Kant, J. (2018). Bank market power and the intensity of borrower discouragement: analysis of SMEs across developed and developing European countries. Small Business Economics, 1–15. https://doi.org/10.1007/s11187-018-0056-y.
- Motta, V. (2018). Lack of access to external finance and SME labor productivity: does project quality matter? Small Business Economics, 1–16. https://doi.org/10.1007/s11187-018-0082-9.
- Rostamkalaei, A., Nitani, M., & Riding, A. (2018). Borrower discouragement: the role of informal turndowns. Small Business Economics, 1–16. https://doi.org/10.1007/s11187-018-0086-5.
- Silva, A. (2011). Financial constraints and exports: evidence from Portuguese manufacturing firms. International Journal of Economic Sciences & Applied Research, 4(3).Google Scholar
- Wang, X. (2016). Financial constraints and exports (January 27, 2016). Available at SSRN: https://ssrn.com/abstract=2698358.
- Wooldridge, J. M. (2010). Econometric analysis of cross section and panel data. MIT press.Google Scholar