The Financing of Smal Firms: Different Continents, the Same Problems?

This article compares the experiences of small firms in the U.K. and Malaysia and assesses whether public and private sector financial initiatives in the two countries have reduced the existence of the finance gap thought to prevail in both

The evaluation criteria used by venture capitalists: evidence from a UK venture fund

Grahame Boocock and Margaret Woods are Lecturers in Banking and Finance, and Financial Management, respectively at Loughborough University Business School, England. The paper examines how venture fund managers select their investee companies, by exploring the evaluation criteria and the decision making process adopted at one UK Regional Venture Fund (henceforth referred to as the Fund). The analysis confirms that relatively consistent evaluation criteria are applied across the industry and corroborates previous models which suggest that venture capitalists’ decision making consists of several stages. With the benefit of access to the Fund’s internal records, however, this paper adds to the current literature by differentiating the evaluation criteria used at each successive stage of the decision-making process. The paper presents a model of the Fund’s activities which demonstrates that the relative importance attached to the evaluation criteria changes as applications are systematically processed. Proposals have to satisfy different criteria at each stage of the decision-making process before they receive funding. In the vast majority of cases, applications are rejected by the fund managers. In addition, the length of time taken by the fund managers in appraising propositions can lead to the withdrawal of applications at an advanced stage

The financing of small firms: different continents, the same problems?

The importance of small firms for economic development has been recognised across the globe. Most governments are aware that smaller enterprises face problems not experienced by their larger counterparts, and have taken steps to provide financial assistance. This article compares the experiences of small firms in the United Kingdom and Malaysia, and assesses whether public and private sector financial initiatives in the two countries have reduced the existence of the “finance gap” thought to prevail in both countries. The research programme conducted for this article suggests that, despite differences in the financial infrastructures, the cultural backgrounds and stages of economic development, small firms in the UK and Malaysia seem to adopt the same financing practices and face the same difficulties in raising funds. The reasons for this phenomenon are explored and the implications for policy-makers are discussed

Using capital theory to explore problem solving and innovation in small firms

Purpose: This study investigated how small firms work at a micro-level, applying Bourdieu’s Capital Theory to give insight into the way individuals use the social and cultural capital at their disposal, to innovate and solve problems. Design/Methodology/Approach: We applied qualitative methods to explore problem solving and innovation activities at the micro-level in small firms, using interviews and thematic analysis. Findings: Our findings reveal that, compared to firms with lower levels of social and cultural capital, firms which possess higher levels of social and cultural capital have a higher success rate in problem solving and are more likely to engage in innovative activity. Social and cultural capitals complement and reinforce one another in small firms, for example an enhanced ability to utilise networks (social capital) allows small firms to access a greater diversity of knowledge (cultural capital). Originality/Value: Little is known about how different forms of capital are utilised in the day-to-day operations and problem solving of small firms: the application of Bourdieu’s Capital Theory offered an original frame in which to explore these activities

Measuring the effectiveness of credit guarantee schemes: evidence from Malaysia

Governments across the globe are increasingly utilizing credit guarantee schemes to support SMEs. This article fills a gap in the academic literature for developing countries by reviewing the effectiveness of the New Principal Guarantee Scheme (NPGS) offered by the Credit Guarantee Corporation (CGC) in Malaysia. Using a variety of research methods, the authors investigate whether the CGC has achieved its objectives of generating finance and economic additionality without placing its financial resources under undue strain or jeopardizing its relationships with participating financial institutions. It is almost impossible to establish ‘definitive’ measures of additionality yet our findings provide sufficient evidence to demonstrate that the CGC is not meeting all of its objectives. The authors put forward an integrated package of measures designed to enhance the effectiveness of the NPGS

Government-backed loan guarantee schemes for small and medium-sized enterprises: An evaluation of the credit guarantee corporation in Malaysia

Governmen t-backed loan schemes have been introduced in many countries to enable small and medium-sized enterprises (SMEs) to have access to funding at a reasonable cost. This paper evaluates the schemes offered in Malaysia by the Credit Guarantee Corporation (CGC). The introduction emphasises the importance placed on the SME sector in achieving fully-industrial ised status for Malaysia, and highlights the fact that the CGC has been charged with a critical role in assisting SMEs. The paper then describes the operation of the CGC and its place within the spectrum offinance aimed at SMEs, before presenting thefindings of an empirical review. Three kzy areas are explored: the relationship between smallfirms, banks and the CGC; the level offinance additionality in evidence; and the level of economic additionality generated. In each of these areas, the CGC's effectiveness in meeting the needs of SMEs, banks and the wider economy appears to have been limited.The paper then describes a radical new Scheme introduced by the CGC and assesses whether this Schenre will enable the CGC to achieve its objectives, notably a greater degree offinance and economic additionality. Finally, the implications of the CGC's experience for other developing countries are briefly summarised

Measuring the effectiveness of credit guarantee schemes: Evidence from Malaysia

Governments across the globe are increasingly utilizing credit guarantee schemes to support SMEs.This article fills a gap in the academic literature for developing countries by reviewing the effectiveness of the New Principal Guarantee Scheme (NPGS) offered by the Credit Guarantee Corporation (CGC) in Malaysia.Using a variety of research methods, the authors investigate whether the CGC has achieved its objectives of generating finance and economic additionality without placing its financial resources under undue strain or jeopardizing its relationships with participating financial institutions.It is almost impossible to establish ‘definitive’ measures of additionality yet our findings provide sufficient evidence to demonstrate that the CGC is not meeting all of its objectives. The authors put forward an integrated package of measures designed to enhance the effectiveness of the NPG

The evaluation criteria used by venture capitalists:evidence from a UK fund

GRAHAM BOOCOCK AND MARGARET WOODS are Lecturers in Banking and Finance, and Financial Management, respectively, at Loughborough University Business School, England. The paper examines how venture fund managers select their investee companies, by exploring the evaluation criteria and the decision-making process adopted at one United Kingdom regional venture fund (henceforth referred to as the Fund). The analysis confirms that relatively consistent evaluation criteria are applied across the industry and corroborates previous models which suggest that the venture capitalist's decision-making consists of several stages. With the benefit of access to the Fund's internal records, however, this paper adds to the current literature by differentiating the evaluation criteria used at each successive stage of the decision-making process. The paper presents a model of the Fund's activities which demonstrates that the relative importance attached to the evaluation criteria changes as applications are systematically processed. Proposals have to satsfy different criteria at each stage of the decision-making process before they receive funding. In the vast majority of cases, applications are rejected by the fund managers. In addition, the length of time taken by the fund managers in appraising propositions can lead to withdrawal of applications at an advanced stage