Does Financing Spur Small Business Productivity?

Access to adequate financing is an important issue for firms, particularly younger and smaller ones. Given the role these firms play in the process of creative destruction, alleviating financial constraints for start-ups and small businesses is an important concern around the world. More recently, the financial crisis of 2008 demonstrated the critical role of bank financing, at both the firm and economy wide levels. While prior studies have examined how financing affects entrepreneurial firm starts and closures, no study has directly analyzed the link between bank financing and firm productivity, particularly for smaller firms where access to financing is critical. This is important given that most start-ups appear to rely on bank-debt financing.

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