Financial Constraints on Innovative SMEs: Empirical Evidence from the Visegrad Countries


  • Jaroslav Belas Tomas Bata University in Zlin
  • Ashiqur Rahman Tomas Bata University in Zlin
  • M. Twyeafur Rahman University of Strathclyde
  • Jaroslav Schonfeld University of Economics Prague



Financial constraints, Innovation, Product innovation, Process innovation, SMEs, Visegrad Countries


This paper empirically investigates financial constraints experienced by innovative small and medium enterprises (SMEs) in the context of Visegrad countries: Czech Republic, Slovak Republic, Hungary and Poland. At first, we examine whether innovative firms seek more external finance and then we examine the likelihood of being successful on a loan application. This study uses the data set from the Business Environment and Enterprise Performance Survey (BEEPS V), which was conducted by the World Bank and the European Bank for Reconstruction and Development (EBRD) during the period of 2012-2014. With respect to firm level analysis, we find that innovative SMEs are likely to seek external finance to support their innovative ideas but the results are not statistically significant. We also did not find any evidence that innovative SMEs experience more credit constraints as compared to non-innovative firms. However, country level analysis suggests that firms in Slovak Republic and Hungary are more likely to seek external finance for process and product innovation. Further we find that mature firms, firms having audited financial statements, and risky borrowers are highly likely to apply for external finance while service oriented firms are less likely to apply for bank finance. Finally, we find that loan application of the experienced borrowers and service firms are more likely to be accepted.


Author Biographies

Jaroslav Belas, Tomas Bata University in Zlin

Department of Enterprise Economics

Full Professor

Ashiqur Rahman, Tomas Bata University in Zlin

Department of Enterprise Economics

Phd candidate

M. Twyeafur Rahman, University of Strathclyde

Phd candidate

Department of Economics

Jaroslav Schonfeld, University of Economics Prague

Deparment of Strategy


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