Skip to main content

Advertisement

SpringerLink
Log in

Firm heterogeneity, credit constraints, and endogenous growth

  • Published:
Journal of Economics Aims and scope Submit manuscript

Abstract

This paper is in general concerned with the role of firm heterogeneity for economic growth. We focus on heterogeneous productivity in innovation and credit constraints of firms within a semi-endogenous growth model reflecting recent empirical findings on firm heterogeneity. Our model allows for an explicit solution for transitional growth and for the balanced growth path level of innovations or ideas. The model predicts an optimal degree of heterogeneity in the presence of an endogenous firm distribution. This enables us to draw inference about the impact of key policy parameters of the model on these quantities and to draw conclusions about firm and capital market related policies.

This is a preview of subscription content, log in via an institution to check access.

Access this article

Log in via an institution

Price excludes VAT (USA)
Tax calculation will be finalised during checkout.

Instant access to the full article PDF.

Institutional subscriptions

Similar content being viewed by others

References

  • Acs ZJ, Audretsch DB (1987) Innovation in large and small firms. Econ Lett 23: 109–112

    Article  Google Scholar 

  • Acs ZJ, Audretsch DB (1988) Innovation in large and small firms: an empirical analysis. Am Econ Rev 78: 678–690

    Google Scholar 

  • Acs ZJ, Audretsch DB (1990) Innovation and small firms. MIT Press, Cambridge

    Google Scholar 

  • Acs ZJ, Audretsch DB (1991) R&D, firm size, and innovative activity. In: Acs ZJ, Audretsch DB (eds) Innovation and technological change: an international comparison. Harvester Wheatsheaf, New York

    Google Scholar 

  • Aghion P, Howitt P (1992) A model of growth through creative destruction. Econometrica 60: 323–351

    Article  Google Scholar 

  • Aghion P, Howitt P (1998) Endogenous growth theory. MIT Press, New York

    Google Scholar 

  • Aghion P, Bond S, Klemm A, Marinescu I (2004) Technology and financial structure: are innovative firms different?. J Eur Econ Assoc 2: 277–288

    Article  Google Scholar 

  • Aghion P, Fally T, Scarpetta S (2007) Credit constraints as a barrier to the entry and post-entry growth of firms. Econ Policy 52: 731–779

    Article  Google Scholar 

  • Almeida H, Campello M (2004) Financial constraints, asset tangibility, and corporate investment. Rev Financ Stud 20: 1429–1460

    Article  Google Scholar 

  • Altman EI, Sabato G (2005) Effects of the new basel capital accord on bank capital requirements for SMEs. J Financ Serv Res 28: 15–42

    Article  Google Scholar 

  • Angelini P, Generale A (2008) On the evolution of firm size distributions. Am Econ Rev 98: 426–438

    Article  Google Scholar 

  • Audretsch DB (2007) From small business promotion to creating an entrepreneurial society. CESifo Forum 8(2): 3–6

    Google Scholar 

  • Audretsch DB, Keilbach MC (2004) Entrepreneurship and regional growth: an evolutionary interpretation. J Evol Econ 14: 605–616

    Article  Google Scholar 

  • Audretsch DB, Thurik AR (2001) Linking entrepreneurship to growth. OECD Science, Technology and Industry Working Papers 2001/2

  • Ayyagari M, Demirgüc-Kunt A, Beck T (2007) Small and medium enterprises across the globe. Small Bus Econ 29: 415–434

    Article  Google Scholar 

  • Baldwin RE, Robert-Nicoud F (2008) Trade and growth with heterogeneous firms. J Int Econ 74: 21–34

    Article  Google Scholar 

  • Beck T, Demirgüç-Kunt A, Laeven L, Maksimovic V (2006) The determinants of financing obstacles. J Int Money Finance 25: 932–952

    Article  Google Scholar 

  • Berger AN (2006) Potential competitive effects of basel II on banks in SME credit markets in the United States. J Financ Serv Res 29: 5–36

    Article  Google Scholar 

  • Bernanke BS, Gertler M, Gilchrist S (1996) The financial accelerator and the flight to quality. Rev Econ Stat 78: 1–15

    Article  Google Scholar 

  • Bernanke BS, Gertler M, Gilchrist S (1999) The financial accelerator in a quantitative business cycle framework. In: Taylor JB, Woodford M (eds) Handbook of macroeconomics, 1st edn, vol 1, chap 21, pp 1341–1393

  • Bertschek I, Entorf H (1996) On nonparametric estimation of the Schumpeterian link between innovation and firm size. Empir Econ 21: 401–426

    Article  Google Scholar 

  • BIS (2009) Strengthening the resilience of the banking sector. Bank for International Settlements, Basel

  • Bond E, Tybout JR, Utar H (2008) Credit rationing, risk aversion and industrial evolution in developing countries. NBER Working Paper No. 14116

  • Bound JC, Cummins C, Griliches Z, Hall BH, Jaffe A (1984) Who does R&D and who patents. In: Griliches Z R&D, patents and productivity. University Press, Chicago

  • Cabral LMB, Mata J (2003) On the evolution of the firm size distribution: facts and theory. Am Econ Rev 93: 1075–1090

    Article  Google Scholar 

  • Carree MA, Thurik AR (1998) Small firms and economic growth in Europe. Atl Econ J 26: 137–146

    Article  Google Scholar 

  • Cohen WM, Klepper S (1996) A reprise of size and R&D. Econ J 106: 925–951

    Article  Google Scholar 

  • Cohen W, Levinthal D (1990) Absorptive capacity: a new perspective on learning and innovation. Adm Sci Q 35: 128–152

    Article  Google Scholar 

  • Cremer J, Sirbu M (1978) Une analyse econometrique de l’effort de recherché et developpement de l’industrie Francaise. Revue Economique 29: 940–954

    Google Scholar 

  • Czarnitzki D, Hottenrott H (2011) R&D investment and financing constraints of small and medium-sized firms. Small Bus Econ 36: 65–83

    Article  Google Scholar 

  • Dannreuther C (2007) EU SME policy: on the edge of governance. CESifo Forum 8(2): 7–13

    Google Scholar 

  • Devereux M, Schiantarelli F (1990) Investment, financial factors and cash flow from U.K. Panel Data. In: Hubbard G (ed) Information, capital markets and investment. University of Chicago Press

  • EC (2010) Lisbon strategy evaluation document. Commission Staff Working Document, Brussels

  • ECB (2009) The Euro area bank lending survey—January 2009. European Central Bank, Frankfurt

  • Entorf H (1988) Die endogene Innovation. Eine mikro-empirische Analyse von Produktphasen als Innovationsindikatoren. Jahrbücher für Nationalökonomie und Statistik 204: 175–189

    Google Scholar 

  • Gale D, Hellwig M (1985) Incentive-compatible debt contracts: the one-period problem. Rev Econ Stud 52: 647–663

    Article  Google Scholar 

  • Gertler M (1988) Financial structure and aggregate economic activity: an overview. J Money Credit Bank 20: 559–596

    Article  Google Scholar 

  • Gorodnichenko Y, Schnitzer M (2010) Financial constraints and innovation: why poor countries don’t catch up. CEPR Working Paper No. 7721

  • Greenwald BC, Stiglitz JE (1987) Imperfect information, credit markets and unemployment. Eur Econ Rev 31: 444–456

    Article  Google Scholar 

  • Grunert J, Kleff V, Norden L, Weber M (2002) Mittelstand und Basel II: Der Einfluss der neuen Eigenkapitalvereinbarung für Banken auf die Kalkulation von Kreditzinsen. Zeitschrift für Betriebswirtschaft, ZfB, 10/2002, 1–20

  • Hall BH, Jaffe A, Trajtenberg M (2005) Market value and patent citations. RAND J Econ 36: 16–38

    Google Scholar 

  • Helpman E, Itskhoki O, Redding S (2008) Wages, unemployment and inequality with heterogenous firms and workers. NBER Working Paper No. 14122

  • Hurst E, Lusardi A (2004) Liquidity constraints, household wealth, and entrepreneurship. J Political Econ 112: 319–347

    Article  Google Scholar 

  • Idson TL, Oi WY (1999) Workers are more productive in large firms. Am Econ Rev 89: 104–108

    Article  Google Scholar 

  • Jacobson T, Lindé J, Roszbach K (2005) Credit risk versus capital requirements under Basel II: are SME loans and retail credit really different?. J Financ Serv 28: 43–75

    Article  Google Scholar 

  • Jones CI (1995) R&D-based models of economic growth. J Political Econ 103: 759–784

    Article  Google Scholar 

  • Jones CI (1999) Growth: with or without scale effects?. Am Econ Rev: Papers Proc 89: 139–144

    Article  Google Scholar 

  • Jones CI (2005) Growth and ideas. In: Aghion P, Durlauf S (eds) Handbook of economic growth. North-Holland

  • Jousten A (2007) SMEs and the tax system: what is so different about them?. CESifo Forum 8(2): 14–20

    Google Scholar 

  • Klees S, Veldhues B (2008) Ausgewählte Ergebnisse für kleine und mittlere Unternehmen in Deutschland 2005. Statistisches Bundesamt—Wirtschaft und Statistik 3/2008

  • Klette TJ, Kortum S (2004) Innovating firms and aggregate innovation. J Political Econ 112: 986–1018

    Article  Google Scholar 

  • Lelarge C, Sraer D, Thesmar D (2010) Entrepreneurship and credit constraints: evidence from a French loan guarantee program. In: Lerner J, Schoar A (eds) International differences in entrepreneurship. NBER Books, National Bureau of Economic Research Inc

  • Lotti F, Schivardi F (2005) Cross country differences in patent propensity: a firm-level investigation. Giornale degli Economisti e Annali di Economia 64: 469–502

    Google Scholar 

  • Luttmer GJ (2007) Selection, growth, and the size distribution of firms. Q J Econ 122: 1103–1144

    Article  Google Scholar 

  • Mata J (1996) Markets, entrepreneurs and the size of new firms. Econ Lett 52: 89–94

    Article  Google Scholar 

  • Michelacci C, Quadrini V (2005) Borrowing from employees: wage dynamics with financial constraints. J Eur Econ Assoc 3: 360–369

    Google Scholar 

  • Michelacci C, Quadrini V (2009) Financial markets and wages. Rev Econ Stud 76: 795–827

    Article  Google Scholar 

  • Musso P, Schiavo S (2008) The impact of financial constraints on firm survival and growth. J Evol Econ 18: 135–149

    Article  Google Scholar 

  • Nelson RR, Phelps ES (1966) Investment in humans, technological diffusion and economic growth. Am Econ Rev 56: 67–75

    Google Scholar 

  • Nelson RR, Winter SG (1973) Toward an evolutionary theory of economic capabilities. Am Econ Rev 63: 440–449

    Google Scholar 

  • OECD (2009) Turin Round Table Meeting on the impact of the global crisis on SME & entrepreneurship financing and policy responses. Chairs summary. http://www.oecd.org/dataoecd/36/27/42514077.pdf

  • Pagano P, Schivardi F (2003) Firm size distribution and growth. Scand J Econ 105: 255–274

    Article  Google Scholar 

  • Papageorgiou C (2003) Imitation in a non-scale R&D growth model. Econ Lett 80: 287–294

    Article  Google Scholar 

  • Pavitt K, Robson M, Townsend J (1987) The size distribution of innovation firms in the UK: 1945–1983. J Ind Econ 35: 297–317

    Article  Google Scholar 

  • Peretto PF (1998) Technological change, market rivalry, and the evolution of the capitalist engine of growth. J Econ Growth 3: 53–80

    Article  Google Scholar 

  • Peretto PF (1999a) Cost reduction, entry, and the interdependence of market structure and economic growth?. J Monet Econ 43(1): 173–195

    Article  Google Scholar 

  • Peretto PF (1999b) Firm size, rivalry and the extent of the market in endogenous technological change. Eur Econ Rev 43(9): 1747–1773

    Article  Google Scholar 

  • Plehn-Dujowich J (2007) Innovation, firm size, and RDSearch. Econ Bull 12: 1–8

    Google Scholar 

  • Saurina J, Trucharte C (2004) The impact of Basel II on lending to small- and medium-sized firms: a regulatory policy assessment based on Spanish Credit Register Data. J Financ Serv Res 26: 121–144

    Article  Google Scholar 

  • Scellato G (2007) Patents, firm size and financial constraints: an empirical analysis for a panel of Italian manufacturing firms. Camb J Econ 31: 55–76

    Article  Google Scholar 

  • Townsend RM (1979) Optimal contracts and competitive markets with costly state verification. J Econ Theory 21: 265–293

    Article  Google Scholar 

  • Verspagen B (1999) Large firms and knowledge flows in the Dutch R&D system: a case study of Philips electronics. Technol Anal Strateg Manag 11: 211–233

    Article  Google Scholar 

  • Wagenvoort R (2003a) Are finance constraints hindering the growth of SMEs in Europe. EIB Pap 7: 22–50

    Google Scholar 

  • Wagenvoort R (2003b) SME finance in Europe: introduction and overview. EIB Pap 8: 10–20

    Google Scholar 

  • Yeaple SR (2005) A simple model of firm heterogeneity, international trade, and wages. J Int Econ 65: 1–20

    Article  Google Scholar 

Download references

Author information

Authors and Affiliations

  1. CPB Netherlands Bureau for Economic Policy Analysis, Van Stolkweg 14, 2585 JR, The Hague, The Netherlands

    Jürgen Antony

  2. University of Augsburg, Universitätsstraße 16, 86159, Augsburg, Germany

    Torben Klarl & Alfred Maußner

Authors
  1. Jürgen Antony
    View author publications

    You can also search for this author in PubMed Google Scholar

  2. Torben Klarl
    View author publications

    You can also search for this author in PubMed Google Scholar

  3. Alfred Maußner
    View author publications

    You can also search for this author in PubMed Google Scholar

Corresponding author

Correspondence to Jürgen Antony.

Rights and permissions

Reprints and permissions

About this article

Cite this article

Antony, J., Klarl, T. & Maußner, A. Firm heterogeneity, credit constraints, and endogenous growth. J Econ 105, 199–224 (2012). https://doi.org/10.1007/s00712-011-0225-9

Download citation

  • Received:

  • Accepted:

  • Published:

  • Issue Date:

  • DOI: https://doi.org/10.1007/s00712-011-0225-9

Keywords

JEL Classification

Search

Navigation