Abstract
PurposeThis paper investigates the effect of entrepreneurial orientation (EO) on small- and medium-sized enterprises' (SMEs) access to credit. Starting with the idea that SMEs' strategy-making process, structures and behaviour can favour credit access, the authors also explore the moderating role of bank lending technologies in shaping this relationship.Design/methodology/approachThis study relies on a unique survey of Austrian and Italian SMEs which contains detailed information on access to credit, EO dimensions, relationship lending and firm-level characteristics. The authors perform stepwise logistic regressions to assess whether EO interacts with SME's access to finance, and how relationship lending enhances this relationship.FindingsProactiveness, autonomy and competitive aggressiveness are important constructs for improving access to bank financing. Those dimensions became more important when a relationship bank is involved, suggesting a role for relationship lending in overcoming SMEs' opaqueness. In addition, relationship lending is crucial for innovative SMEs in overcoming credit denial rates.Research limitations/implicationsThe small sample did not allow to analyse the effect of EO on discouraged borrowers. Furthermore, alternative measures of relationship lending (such as geographical proximity or the length of the relationship) and the share of credit granted by the relationship bank would have been interesting to further validate our results.Practical implicationsThis study shows that EO dimensions and the type of lending technology are relevant for the financial success of SMEs. More precisely, the authors show that diversity within the banking system helps innovative, autonomous, proactive and competitive SMEs. These important pieces of soft information are injected into the final lending decision when a relationship bank is involved. The evidence suggests the need for SMEs to interact with local banks to fully exploit their EO posture.Originality/valueTo the authors' knowledge, this paper is the first attempt to analyse whether relationship lending can affect the EO–credit access relation.
Highlights
In this paper, we analyse whether bank lending technologies shape the effect of entrepreneurial orientation (EO, hereafter) on small- and medium-sized enterprises’ (SMEs) access to credit.It is widely recognized that SMEs face obstacles in accessing external financing due to their financial structure, asymmetric information problems, agency risk and limited availability of collateral (Stiglitz and Weiss, 1981)
3.3 EO measurement We measure the five EO dimensions through 5 multi-items Likert scales: risk-taking (RISK, six items taken from Hornsby et al (2002), Morgan and Strong (2003) and Acedo and Jones (2007)); innovativeness (INNOV, four items taken from Calantone et al, 2002); proactiveness (PROAC, ten items taken from Acedo and Jones, 2007; Hult and Ketchen, 2001 and Morgan and Strong, 2003); competitive aggressiveness (AGRESS, six items taken from Lumpkin and Dess, 2001) and autonomy (AUTON, nine items taken from Engel (1970), Hornsby et al (2002) and Spreitzer (1995))
We include four different variables that capture the presence of collateral or third-party guarantees for the main firm-bank financing relationship: the first indicates the presence of collateral (GUA); the second signal the use of a guarantee from a financial institution (BG) or a mutual guarantee (MG); the third measure the presence of a public guarantee (PG). 63% of the firms in our sample use collateral (GUA), while only a small portion use guarantees from financial institutions (22%), mutual guarantee funds (18%) and public guarantees (22%)
Summary
We analyse whether bank lending technologies shape the effect of entrepreneurial orientation (EO, hereafter) on small- and medium-sized enterprises’ (SMEs) access to credit. It has been highlighted that the combined effect of soft information and lending technology can be significant in the bank–firm relationship (Ferri et al, 2019), no conceptual and empirical work about credit access has been devoted to analysing how a relationship lending or a transaction lending style (Berger and Udell, 2006) can interact with each EO dimension. We show how an important piece of soft information (EO construct) can be incorporated in lending relationships and mitigate the possible negative effects of credit constraints, constituting a valuable resource for banks and entrepreneurs in times of uncertainty. We separately analyse the effect of each dimension of EO on firm loan demand and loan outcome and how the use of relationship lending technologies can interact inside the EO – external financing relationship. We formulate the underlying hypothesis on the effect of each of the five dimensions of EO defined in Lumpkin and Dess (1996) on access to finance
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