Firm financial soundness and knowledge externalities: A comparative regional analysis

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Abstract

This paper investigates the role of the regional context with regard to the influence of human capital and knowledge spillovers on SMEs' financial soundness. Our empirical setting is based on a multilevel analysis of panel data, which allows superior treatment of hierarchical data. The analysis is applied to SMEs belonging to the manufacturing sector and operating in four European countries over the period 2010–2015. We find that a combination of individual and regional-level characteristics explains firm soundness better than individual features alone. Furthermore, we find that a high local educational level and knowledge spillovers improve firm soundness and that their effects vary according to the regional level of knowledge. These results are confirmed by several robustness tests.

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Abdel Fattah, L., Arcuri, G., Garsaa, A., & Levratto, N. (2020). Firm financial soundness and knowledge externalities: A comparative regional analysis. Papers in Regional Science, 99(5), 1459–1486. https://doi.org/10.1111/pirs.12539

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