Innovation , start-up , credit information sharing , soft information
Abstract:
Start-up firms often face difficulties in raising external funds. Employing a unique panel
dataset covering 9,715 start-up firms over the period 2007-2009, we find that high-tech startups
are less likely to use bank finance and face more difficulties in raising bank finance than
low-tech start-ups. We find that external credit scores do affect the availability of credit for
start-up firms, but that banks rely less on external rating information in their decision making for high-tech start-ups than low-tech start-ups. Start-ups that have their main relation with a small bank use more bank finance and report less difficulties in getting credit. By contrast, a greater expertise of the bank in the firm’s industry is not associated with fewer difficulties to get bank loans. There are no differences between high-tech and low-tech start-ups regarding the impact of bank size.
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