Financial Determinants of Innovation in SMEs: A Machine Learning Approach

Abstract

The main contribution of this study is to offer a general hierarchy of the most important financial variables associated with determining the presence of innovation. The variables’ importance is computed based on an ensemble neural network model, which predicts the presence of innovation in a sample of the small-and medium-sized enterprises (SMEs) from the emerging market of Colombia. The results suggest that to innovate, the variables associated with the sources and uses of financing, and not the variables associated with the characteristics or credit of the company, predominate. The variables related to managers are secondary.