How to Fill the Gap Between Knowledge and Innovation
Edited by Jean Bonnet, Domingo García Pérez De Lima and Howard Van Auken
Chapter 5: Entrepreneurial Finance in France: The Persistent Role of Banks
Sylvie Cieply and Marcus Dejardin INTRODUCTION 5.1 Since the early 1980s scientific observers and policy practitioners have drawn attention to the role of new firms for their positive contribution to employment and to local development (Acs and Audretsch, 1993; Loveman and Sengenberger, 1991; Piore and Sabel, 1984). Small has become beautiful but small is often perceived as difficult to finance. Financial constraints are indeed among the most cited impeding factors for entrepreneurial dynamics to flourish (for a review, see Parker, 2004). New firms are not profitable enough to be self-financed. Because of both informational standards and costs associated with initial public offerings, they cannot raise equity on financial markets. Those whose growth rate is not exponential are not the targets of venture capital funds or business angels. Finally, their external financing is mainly based on loans, especially banking loans. In comparison with other creditors, banks indeed benefit from advantages in financing opaque firms, and in particular new firms. Banks are specialized in gathering private information and treating it (Freixas and Rochet, 1997) and, as they manage money and deposit accounts, they own highly strategic information on firms’ receipts and expenditures and on the way firms develop themselves or not (Diamond and Rajan, 2001; Ruhle, 1997). However, the credit market is not perfect and, since Turgot (1766 ), Smith (1776) and Keynes (1930 ), the idea that some firms may suffer from a lack of access to credit is widespread. The credit gap finds strong theoretical support in the model of...
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