A Built Economy in Education, Sustainability and Regulation
Edited by Jean Bonnet, Marcus Dejardin and Antonia Madrid-Guijarro
Chapter 12: Does the Regional Dimension Matter as Regards Finance and Entrepreneurship?
12. Does the regional dimension matter as regards finance and entrepreneurship? Jean Bonnet, Sylvie Cieply and Marcus Dejardin INTRODUCTION Financial constraints are among the impeding factors most cited for entrepreneurial dynamics to flourish (Evans and Jovanovic, 1989; Holtz-Eakin et al., 1994). New firms do not generate enough earnings to self-finance their growth. Raising equity on the financial market without any track record is usually forbidden and anyway too costly. Most new firms, whose growth rate is not exponential, cannot be the target of venture capital funds or business angels. Finally, in spite of financial innovations, their external financing remains based on access to bank loans. And it can be assumed that new firms are highly constrained on the credit market too. For a decade, this problem has received much attention. Many studies underline the high financial pressures supported by small firms as their informational system is insufficiently formalised (Gertler and Gilchrist, 1993, 1994; Carpenter et al., 1994; Gilchrist and Himmleberg, 1995). Their informational disadvantage drives to informational asymmetries between creditors and debtors, and produces situations of rationing in the credit market (Binks et al., 1992; Berger and Udell, 1998). Despite the relative homogeneity of the banking supply in France, credit rationing appears not to be equally distributed among French regions (Bonnet et al., 2005). Some regional differences are indeed still at work when financial constraints of new firms are analysed. In particular, the probability a start-up will be unconstrained is higher (or equal for a few regions) in all the...
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