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The financing and technology decisions of SMEs: I. Finance as a determinant of investment
This paper surveys the theoretical and empirical literature on the financing of investment in order to lay the foundation for subsequent analysis of technology investments by Southern European SMEs. By adapting a variety of approaches to suit this purpose, a number of findings for policy are reached. In particular, it is found that support for highly successful SMEs is distinct from support for struggling SMEs, and that each has different implications for innovation and employment. Furthermore, policy to encourage banking efficiency and policy to stimulate venture capital investment are seen as competing ways forward, with potentially very different results for SMEs' technology investment. The most significant suggestion of this paper, however, is that finance may determine not just the level but also the nature of technology investment.