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Access to finance for SMEs: Young, growth oriented companies and company take-overs (SMEPEFI)

Research project TA/00/41 (Research action TA)

Persons :

  • Dr.  MANIGART Sophie - The Vlerick Leuven Gent Management School (VLERICK)
    Coordinator of the project
    Financed belgian partner
    Duration: 1/2/2011-20/4/2014
  • Prof. dr.  CLARYSSE Bart - Universiteit Gent (RUG)
    Financed belgian partner
    Duration: 1/2/2011-20/4/2014
  • Dr.  HUBNER Georges - Université de Liège (ULG)
    Financed belgian partner
    Duration: 1/2/2011-20/4/2014
  • Dr.  MEULEMAN Miguel - The Vlerick Leuven Gent Management School (VLERICK)
    Financed belgian partner
    Duration: 1/2/2011-20/4/2014
  • Dr.  WRIGHT Mike - University of Nottingham (UNI-NOTT)
    Not-financed foreign partner
    Duration: 1/2/2011-20/4/2014

Description :


The “Small Business Act for Europe”, adopted in 2008, reflects Europe’s political will to recognise the central role of dynamic SMEs in Europe. One of its major aims is to promote SMEs’ growth by enabling them to reap opportunities from globalization and from the acceleration of technological change. The EU recognizes that “SMEs still face market failures undermining the conditions in which they operate and compete with other players in areas like finance (especially venture capital), research, innovation and the environment” (Small Business Act for Europe, 2008, p. 3). For example, before the financial crisis, about 21% of SMEs indicate that accessing the right kind of finance was a problem (2007 Observatory of EU SMEs); this came second on the list of their concerns. Hence, the facilitation of SMEs’ access to finance (and in particular to risk capital and mezzanine finance) has been defined as a key area of interest, as well for starting and growing businesses as for transferring businesses. The latter is important, as an estimated 6 million small business owners will retire over the next ten years in Europe. Transferring these businesses successfully might preserve more jobs than those created by new start-ups (Small Business Act for Europe, 2008). While some progress has been made to improve the access to finance for European SMEs, important market failures still exist (Report on the implementation of the SBA, 2009).

Despite the growing academic and political interest in the financing of SMEs, the current state of research does not allow for drawing unequivocal conclusions about the most effective policy measures to be taken to improve access to financing for SMEs. In working out policy measures, the Belgian government and social partners are confronted with a wide range of international, national and regional data, but these are often isolated, focusing on the one or the other type of financing and hence lacking an integrated perspective or failing to take into account the specific characteristics of the Belgian institutional context. Further, the relationship between the sources and type financing and subsequent SME development are poorly understood.


The main goal of this is study is to provide valuable input to Belgian policy makers to improve access to the optimal type of finance to SMEs. The core focus of the project is on two central processes: the financing of young innovative, growth-oriented enterprises and the financing of business transfers. More specifically, the objectives are twofold. We aim to increase insight into (1) how companies are financed in their initial growth phase and when transferred, and (2) how these financing strategies impact their further development.
While most research on the financing of SMEs is largely limited to one or two specific types of financing such as bank loans or venture capital, most SMEs use a variety of financing alternatives. Further, some types of funding may improve or preclude access to other types of funding. Our first objective is hence to understand how Belgian companies finance their development or transfer, including a broad range of financing options, and compare this to the financing of comparable companies in different European countries. Not only will the availability of financing be investigated, but also its cost. Second, little rigorous work has been done on how the access to finance impacts the development of an SME. Raising finance is often seen as an end in itself, rather than as a critical resource that impacts the course of action in an SME. For policy makers, entrepreneurs and academics alike, understanding which financing strategies produce optimal outcomes, contingent upon institutional and firm differences, is important. Our second objective is hence to understand how financing strategies impact future company development, including for example growth in employees, assets or added value. Further, some investors such as venture capital investors have an explicit exit focus, i.e. they aim to exit their investment in the medium term. We therefore will research how the type of investor impacts company development, including company exit.
In order to provide these insights, we draw on multiple scientific disciplines (including finance, entrepreneurship and innovation), which is also reflected in the multidisciplinary nature of the research team. Since this is a policy-oriented research project, we believe that an important contribution lies in a stronger conceptual integration of factors affecting the financing choices and impact studied in different research traditions, rather than limiting our focus to one discipline and exploring this in depth. Policy makers can gain from a rigorous and scientifically valid study of factors addressed in different disciplines. This conceptual integration is translated into a research design that makes use of two longitudinal international databases.


Our research consists of two phases.

Phase A: Young innovative companies

We will use the recently developed VICO database, which has been built thanks to the joint effort of 9 European universities with the support of the 7th European Framework Program (Grant agreement no.: 217485). The longitudinal dataset consists of 8,391 young and innovative companies active in 7 European countries (Belgium, Finland, France, Germany, Italy, Spain and the United Kingdom), 761 of which are (were) VC-backed. All companies included in the sample were founded after 1984, were independent at foundation, and operate in a high-tech sector. This unified panel contains data on the entrepreneurial firm during on average eight years and on the investors in the firm. Important assets of VICO are the longitudinal and multilevel character of the data. Even though VICO contains a large contextual database, not all relevant variables are available. Therefore, we will enrich the data with new variables collected by the research team through databases such as EVCA database, Zephyr, VentureXpert and/or Factiva.

Phase B: Transfer of companies

The Vlerick Leuven Gent Management School and Nottingham University (Center for Management Buy-Out Research – CMBOR) have developed a database with information on buy-outs, i.e. the transfer of companies (or business units), often to the existing management team, with the financial help of external equity investors. This longitudinal database combines proprietary information on buyouts from the Center for Management BuyOut Research, loan information from Reuters' LPC Deal Scan, bank characteristics from Bankscope, private equity characteristics from EVCA and Prequin, and on average five years of post-buyout accounting information from Amadeus. It comprises 2486 deals from 43 countries worldwide, including Belgium.

Methods of analysis

First, the data in both databases will be described in detail with specific attention to the comparison of Belgian companies with companies in other countries. Thereafter, the data will be analyzed with appropriate multivariate statistical techniques, adapted to the specific research question at hand. More specifically, we intend to use (i) multinomial regression analyses to model financing strategies; (ii) Generalized Estimating Equation (GEE) approach to model firm growth and development; and (iii) survival analysis to model the probability and type of firm exit. Results will be discussed with industry experts and public policy makers.
In view of the policy-oriented nature of the research, this project takes a broad perspective on the topic of financing constraints in SMEs. Its contribution lays in the integration of different types of funding and the impact of funding type and investors on SME development.

Documentation :

Event "Wie zoekt die vindt. Op zoek naar investeerders voor start-ups en buy-outs in het nieuwe financieringsklimaat":

Access to finance of SMEs: young growth oriented companies and company transfers : final report (SMEPEFI)  Manigart, Sophie - Clarysse, Bart - Hübner, Georges ... et al  Brussels : Belgian Scientific Policy, 2015 (SP2625)
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