This paper provides evidence that capital market imperfections hold back innovation and growth, and that public policy can complement capital markets. We deliver the evidence by studying the effects of government funding on the behavior of SMEs in Finland. By adapting the methodology recently...

Building on a 1998 study by Rajan and Zingales, this paperexamines the impact of both general and government financial support on privateR&D rates and on firm expansion.A description of the theoreticalbackground for this research is provided with an emphasis on the subsidizationof small- and...

Using recently collected data on Finnish small businesses, we provide evidence that the debt capacity of growth options, defined as the amount of debt that firms optimally raise for an incremental project, is negative, especially in the information and communications technology (ICT) sector. We...

We study the effects of investor protection on the availability of external finance, entrepreneurship, and creation of new firms in an equilibrium search model of private capital markets. In addition to search frictions, we examine contract frictions, specifically interim and ex post moral...

Using new data originating from a recently conducted survey, this paper examines the financing of small and medium-sized enterprises (SMEs) in private equity and debt markets in Finland. We find that the three most important sources of funds are the principal owner’s equity, trade credit...

In this paper we present a comparative analysis of Nordic countries’ financial systems and consider in particular the recent growth of Nordic venture capital industries. We document that the Nordic countries’ financial systems display several similarities that have characterized their...