Does the cost of energy matter for innovation? The effects of energy prices on SME innovation in Sub-Saharan Africa
Energy and environment has gained traction within the field of entrepreneurship literature, but a comprehensive empirical study that examines the relationship between the cost of energy and small- and medium-sized enterprise (SME) innovation is an omission. Therefore, this novel study aims to examine the relationship between the cost of energy and SMEs innovation in Sub-Saharan Africa (SSA) by first examining the differential impact of the various generation sources on the price of electric energy. This research has enabled us to investigate and understand the transmission mechanism of increasing/decreasing electricity price on innovation decisions and activities of SMEs in SSA. Using quantitative approach, with the data from the World Bank Enterprise and Innovation Follow-up Surveys, the study utilises a Tobit model to test whether the generation mix (renewable and non-renewable generation sources) increases or decreases electricity prices and examine the impact of the cost of electric energy on SMEs innovation in SSA. The findings of this study shows that the cost of electricity affects negatively on SMEs innovation decision and activities of SMEs in SSA. The impact of renewables on the price of electricity has a larger magnitude relative to that of non-renewables. This finding has implications for policy makers promoting renewable energy without a policy design to tackle the unintended price effect of promoting renewable energy. This is the first study to introduce cost of energy into an innovation model and to empirically examine the role of cost of energy for innovation activities of SMEs in SSA. Further, it examines the sources of generation on electricity price in SSA. The study contributes towards the empirical literature, and the findings also have implication for policy makers regarding the unintended consequences of promoting the transition to low-carbon electricity generation sources on SMEs via the cost of doing business implication.
Environmental tax, SME financing constraint and Innovation: Evidence from OECD Countries
This paper examines the impact of environmental tax on SME innovation and how SME financing constraint moderates this relationship. Given the paucity of research on the implications of financing constraints on SMEs’ green innovative activities, the study adopts cross-country panel data to investigate the impact of environmental tax on SME’s innovative activities across 24 OECD countries for the period 2000-2019. Results from our study indicate that an increase in environmental tax leads to a decrease in SME innovation. Further, we also find that financing constraint positively moderates the relationship between environmental tax and SME innovation. Our findings shed new light on the theoretical and practical implications of financing constraints on SMEs’ green innovative activities.
The Impact of Refinery and Oil Demand Shocks on the Motor Fuel Market in Sweden
This paper examines the link between the oil market and the motor fuel market in Sweden by developing a joint oil and motor fuel market in a structural VAR model. We explore the dynamic relationship between the oil market and motor fuel market (both gasoline and diesel) by focusing on the effects of oil demand and refinery shocks on motor fuel price and consumption. The results reveal opposite responses of gasoline and diesel consumption to positive oil demand shocks. Moreover, motor fuel price response to both oil demand and refinery shocks is greater than that of motor fuel consumption. We also assess the immediate and long-run contributions of each of the shocks to the total variation of motor fuel price and consumption in the Swedish motor fuel market
Are competitive microfinance services worth regulating? Evidence from microfinance institutions in Sub-Saharan Africa
In recent years there is increasing appetite for regulation of microfinance services after the 2008 financial crisis. Policy questions such as whether competitive micro finance institution (MFI) requires strong regulation to reduce, for example credit risk or competition and regulation operate in the opposite direction, which each tends to dampen the effect of the other, is an empirical issue that this paper provide answers based on data on Sub-Saharan Africa (SSA) for the period 1995 to 2015, utilizing panel data approaches. Finding from the study indicates that low competition increases credit risk among MFIs in SSA, which regulation helps reduce such behaviour. The effect of regulation on credit risk is conditional on the level of competition, at the first percentile of competition (imply more competition); regulation does not reduce credit risk behaviour of MFIs but does at competition level above the 25th percentile (imply less competition). Regulation on the other hand does not affect operational risk at any level of competition. These findings have implications for policy formulation on the regulation and operations of MFI’s in Sub-Sahara Africa. Our findings suggest that MFI industry could be regulated efficiently if policymakers develop policies targeted at reducing credit risk exposures of MFI's than their exposure to operational risk.
“Technology Constraints to Firm Performance: The Moderating Effects of Firm Linkages and Cooperation
Manufacturing and services SMEs in Africa face challenges and constraints exacerbated by ineffectual government policies, environmental turbulence and the near absence of institutional support. The purpose of this paper is to investigate if informal linkages and formal cooperation are helping firms to overcome constraints to uptake of technological innovations in Nigeria. The paper is based on quantitative data obtained from structured interviews of 631 Nigerian firms. These firms were selected using stratified random sampling from a total population of 18,906 manufacturing and services companies in the national database obtained from the National Bureau of Statistics. The result of the binary logistic regression indicates that while informal linkages appear to be insignificant, formal inter-firm cooperation is an effective moderator of barriers to technological innovations. The paper focusses only on technological, rather than non-technological, innovations. The paper recommends that, in addition to other interventions to promote diffusion of technological innovations, governments should give priority to interventions that support formal cooperation among SMEs. Previous studies have generally looked at the impact of cooperative networks on firms’ innovation uptake. This paper provides original insights into the “how” of cooperative impact, specifically with respect to helping SMEs to overcome constraints. The paper also delineates formal cooperation from informal linkages.
Unintended Consequences of Microfinance for Women’s Empowerment in Ghana
Against the background of growing concerns that development interventions can sometimes be a zero sum game, the purpose of this paper is to examine the unintended consequences of microfinance for women empowerment in Ghana. The study employs a participatory mixed-method approach including household questionnaire surveys, focus group discussions and key informant interviews to investigate the dynamics of microfinance effects on women in communities of different vulnerability status in Ghana. The results of hierarchical regression, triadic closure and thematic analyses demonstrate that the economic benefits of microfinance for women is also directly associated with conflicts amongst spouses, girl child labour, polygyny and the neglect of perceived female domestic responsibilities due to women’s devotion to their enterprises. In the light of limited empirical evidence on potentially negative impacts of women empowerment interventions in Africa, this paper fills a critical gap in knowledge that will enable NGOs, policy makers and other stakeholders to design and implement more effective interventions that mitigate undesirable consequences.
Is Knowledge that Powerful? Financial Literacy and Access to Finance: An Analysis of Enterprises in the UK
The purpose of this paper is to examine the relationship between financial literacy, access to finance and growth among small- and medium-sized enterprises (SMEs) within the Midlands region of the UK. It assesses whether financial literacy assists SMEs to overcome information asymmetry, mitigates the need for collateral, optimizes capital structure and improves access to finance. To gain a deeper insight into the complex relationship between financial literacy, access to finance and growth, a qualitative research is carried out among SMEs that have operated for over five years or longer. Using the purposive sampling technique, 37 firms were selected based on size, location and characteristics, mainly from the city of Birmingham and the joining conurbations. Open-ended and a combination of dichotomous questions were used for the survey. Interviews were recorded, transcribed and thematically analyzed. Financial literacy is an interconnecting resource that mitigates information asymmetry and collateral deficit when evaluating loan applications, therefore financial literacy should be part of school curriculum. The analysis suggests enhanced financial literacy, reduces monitoring cost and serves to optimize firms’ capital structure that positively impacts on SMEs growth. Financial management knowledge is recognized as the core resource that aids an effective decision making by owners of SMEs. The limitation of this research is the small sample that limits its generalization. Its findings could be enhanced by a larger sample and by conducting comparative studies in other regions or economies. SMEs growth is seen as a strategic policy to stimulate enterprise but the finance gap tends to constrain that objective. The UK Government’s effort to improve access to finance and to mitigate excessive collateral demands by lenders has proved elusive. This empirical research provides evidence that financial literacy enhances access to finance and, in turn, promotes growth potentials. The results of this study advocate the provision of financial literacy at schools and target support for SMEs to acquire financial management skills in order to mitigate information asymmetry between lenders and borrowers. Findings suggest that financial literacy mediates access to finance, enables enterprises to use optimal financial structure to mitigate business failure, creates employment and reduces public sector support for social benefits. This study is novel in that it examines financial literacy and its implications for access to finance and firm growth in the UK. The study is an effort to highlight the role of financial information in mitigating barriers to finance for SMEs.