Formal Finance Usage and Innovative SMEs Evidence from ASEAN Countries

摘要

This paper provides evidence on the likelihood of formal finance usage among innovativesmall and medium enterprises (SMEs) operating in ASEAN countries. To this end, the SMEs areclassified into four categories, namely non-innovators and product, process, and product-and-processinnovator SMEs. Subsequently, a propensity score weighting (PSW) analysis is performed to adjust fordiversity existing across innovative SMEs. The resulting propensity scores are further used to performthe causal effect analysis based on the average treatment effect (ATE) approach, which measures thelikelihood of formal finance usage among different types of innovative SMEs. Our ATE results revealthat SMEs simultaneously engaged in product and process innovation show a higher likelihoodof using formal finance than non-innovators. However, formal finance usage of SMEs perusingonly product/service or process innovation is not any different from non-innovators. Furthermore,our pairwise analysis shows that product and process innovators also exhibit a higher likelihood offormal finance usage than product/service or process innovators. Besides, younger and medium-sizeproduct and process innovating SMEs are more likely to use formal finance. These results are robustfor different subsamples and firm- and country-level controls.