Paper short abstract:

We examine the degree to which the quality of government programs, directly supporting SMEs at all stages of government (national, regional, municipal), moderates the nexus between ownership, heterogeneous sources of finance and entrepreneurs’ ability to introduce new products to the market

Paper long abstract:

Many firms are mostly SMEs that contribute primarily to job creation and sustainability of regions compared to large firms globally. Similarly, the innovation activities of firms are considered a sine qua non for growth and development. However, differences in accessing finance and the quality of government programs and support for SMEs vary substantially between nations across the globe. We propose that the quality of government programs should impact businesses positively considering other firms’ resources. Employing a representative sample of 57, 642 firms from 2008-2015, we examine the degree to which the quality of government programs, directly supporting SMEs at all stages of government (national, regional, municipal), moderates the nexus between ownership, heterogeneous sources of finance and entrepreneurs’ ability to introduce new products to the market. Our findings indicate that government programs are essential components of firms’ in-house and external resources matrix for firms across these countries. We find complementarity and substitutability between firms’ resources (internal & external) and government assistance programs on innovation. Interestingly, our predictive graphs offer a more nuanced picture and significant differences of this link for East Asia & Pacific, Europe & Central Asia, Latin America & Caribbean, Middle East & North Africa, South Asia, and sub-Saharan Africa. We observe that countries with perceived weak institutions affect government aid programs adversely, influencing firms’ resources in predicting a return to innovation. Our empirical analysis supports the synergies between ownership heterogeneity, diverse sources of finance government assistance programs and innovation.