The Role of Loan Guarantee Schemes in Alleviating Credit Rationing in the UK

It is a widely held perception, although empirically contentious, that credit rationing is an important phenomenon in the UK small business sector. In response to this perception the UK government initiated a loan guarantee scheme (SFLGS) in 1981. In this paper we use a unique dataset comprised of small firms facing a very real, and binding, credit constraint, to question whether a corrective scheme such as the SFLGS has, in practice, alleviated such constraints by promoting access to debt finance for small credit constrained firms. The results broadly support the view that the SFLGS has fulfilled its primary objective.credit rationing; small firms; entrepreneurship; debt finance

What really happens to smaller businesses in a global financial crisis?

Research by Marc Cowling and colleagues examines what happens to smaller businesses in a time of economic crisis. They find that recessions do take their toll on the smaller business sector, but these effects appear relatively short lived in general and affect specific types of small businesses and entrepreneurs more than others

Still At Work? An empirical test of competing theories of long hours culture

There is increasing evidence of a widening in the cross-country dispersion in general working hours. More recently, however, there has been considerable attention given to the “long hours culture” phenomenon identified in certain segments of the labour market, in particular amongst professional and managerial staff, and potential causes and impacts of such a culture. In this study we use a large-scale European worker survey to test the validity of several competing hypotheses of why people work long hours. Our results show that there is a labour – quality of leisure trade-off for women, but not for men. Other key determinants of long working hours are industry sector, occupational status, gender and job security proxied by employment contracts.long hours work; labour-leisure trade-offs; labour supply

The "virtuous circle" of informal investment activity: evidence from the UK

Working paper dated May 2003This paper seeks to quantify the frequency, scale and demographic characteristics of informal investor activity in the UK over a three year period 1999-2001 using population survey data. 1.1 million informal investors invest £12.8 billion per annum. The 'typical' informal investor would appear to be a well educated, middle-aged male from a higher social class with direct experience of starting-up a business. The importance of multiple forms of entrepreneurial experience suggests the existence of a 'virtuous circle'. Successful entrepreneurs metamorphose into informal investors and become an important source of both finance and relevant experience to other, as yet, un-established entrepreneurs

Financing entrepreneurship in times of crisis:Exploring the impact of COVID-19 on the market for entrepreneurial finance in the United Kingdom

This commentary explores the manner in which the current COVID-19 crisis is affecting key sources of entrepreneurial finance in the United Kingdom. We posit that the unique relational nature of entrepreneurial finance may make it highly susceptible to such a shock owing to the need for face-to-face interaction between investors and entrepreneurs. The article explores this conjecture by scrutinising a real-time data source of equity investments. Our findings suggest that the volume of new equity transactions in the United Kingdom has declined markedly since the outbreak of the COVID-19 pandemic. It appears that seed finance is the main type of entrepreneurial finance most acutely affected by the crisis, which typically goes to the most nascent entrepreneurial start-ups facing the greatest obstacles obtaining finance. Policy makers can utilise these real-time data sources to help inform their strategic policy interventions to assist the firms most affected by crisis events.Publisher PDFPeer reviewe

Evaluation of the Danish Growth Fund: evaluation of activities, 2010–2012

Report commissioned by the Danish Ministry of Business and Growth.With this report, DAMVAD, professor Gordon Murray (UK) and professor Marc Cowling (UK) evaluate the activities of the Danish Growth Fund (DGF) from 2010 to 2012 on behalf of the Danish Ministry of Business and Growth. The evaluation seeks to address the objective of DGF to mitigate market failure and create socio-economic return in light of the development of DGF over time and international experience in this field.Danish Ministry of Business and Growt

A conceptual framework for measuring entrepreneurship and innovation of young hi-technology firms

This paper examines the differenttheories that have been developed in economics andinnovation management to explain the causal chainof events through which entrepreneurs can delivermore innovation and ultimately higher growth forthe benefits of the regional and national economiesand identifies the key firm-based factors that leadto survival and long term development of hightechnology firms. It determines the extent of theentrepreneurial activities and possible factors thatconstrain or assist the growth process of these firms.It then draws upon the key predictions of the coretheories of entrepreneurship and innovation toformulate a model for measuring the characteristicsof entrepreneurial hi-tech firms, characteristics ofinnovating firms, and innovation and firm growthdynamics. The model is developed to explain thesekey building blocks that might lead to enhancedprior economic growth and the patterns anddynamics observed in a developing country context

Small Firm Lending Contracts: Do Banks Differentiate between Firms?

This paper examines the role of interest rates and securities within the context of the small firm - bank lending relationship and questions whether banks alter their lending conditions on the basis of specific firm characteristics and the nature of the borrowing undertaken. The results suggest that the imposition of full collateralization reduces the role of interest rates considerably, although there is evidence of banks exercising their market power in more costly lending of the smallest of firms

Dynamic Discouraged Borrowers

This paper investigates the intertemporal dynamics of borrower discouragement. Using a cross-country panel of firms that were resurveyed across the waves of the Survey on Access to Finance of Enterprises, we find that the probability of transitioning into discouragement changes over the business cycle and across bank financing products: term loans and credit lines. Past credit experiences and firm-level risk indicators are important factors in explaining the probability of being discouraged over time.We also analyse the transitioning out of discouragement, and show that firm-level improvements in credit history and profit outlook drive the transitioning out of the discouragement state