1887

OECD Regional Development Working Papers

Working papers from the Regional Development Policy Division of the OECD cover a full range of topics including regional statistics and analysis, urban governance and economics, rural governance and economics, and multi-level governance. Depending on the programme of work, the papers can cover specific topics such as regional innovation and networks, the determinants of regional growth or fiscal consolidation at the sub-national level.

English

The geography of Swedish SMEs’ investments

Financial constraints across the urban-rural hierarchy in a wealthy country with low regional disparities

This paper advances our knowledge of the spatial determinants of productivity by empirically demonstrating one such mechanism – clear differences along the urban-rural continuum in the sensitivity of SMEs’ investments to own cash flow. Whereas the literature has established uneven availability of credit across space, the evidence on whether this translates into differences in actual business investments remains scarce. We answer this question in the context of Sweden – a highly digitalised country with low regional inequalities. We find that the world of financing is not yet flat for the majority of Swedish SMEs. Companies located in non-metro regions are most dependent on own cash flow in their investments. The results hold for all firms, firms of different sizes, firms operating in low-end services, unaffiliated firms and those belonging to domestic corporations. In contrast, investment – cash flow sensitivity of firms operating in high-tech services and those belonging to a multinational enterprise does not differ geographically. On average, regional investment-cash flow sensitivity is lower in bigger, denser and more educated local labour market regions; it is higher in regions with greater concentration of SMEs.

English

Keywords: financial constraints, SMEs, urban-rural continuum, investment decisions, access to finance
JEL: D25: Microeconomics / Production and Organizations / Intertemporal Firm Choice: Investment, Capacity, and Financing; R10: Urban, Rural, Regional, Real Estate, and Transportation Economics / General Regional Economics / General; R51: Urban, Rural, Regional, Real Estate, and Transportation Economics / Regional Government Analysis / Finance in Urban and Rural Economies; O18: Economic Development, Innovation, Technological Change, and Growth / Economic Development / Economic Development: Urban, Rural, Regional, and Transportation Analysis; Housing; Infrastructure
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