The Basel II Reform and the Provision of Finance for R&D Activities in SMEs : An Analysis for a Sample of Italian Companies

In this paper, we investigate the issue of financial constraints to innovation in SMEs in Italy with respect to the future changes in the banking system, which will be driven by the adoption of the new version of the Basel Capital Accord, scheduled to be implemented after 2006. The study is based on firm-level data from the Mediocredito survey (2004). The availability of a qualitative indicator of financial constraints allows us to estimate possible determinants of credit rationing. Our empirical analysis is twofold: first, we implement a probit model in order to observe if the indicators of Ramp;D intensity exert a significant impact on the probability of being denied credit. After deriving these results, which in general suggest a weak effect of the variables accounting for Ramp;D intensity on the probability of a firm declaring the need of additional financial resources, we perform a simulation on the potential impacts of the adoption of the Basel II capital requirements by Italian banks on lending conditions to small and medium enterprises involved in product innovation