What influence do access to finance and sources of financing have on European firms investment, particularly for investment in innovation where European firms are lagging behind US firms? The results are mixed according to a STAREBEI research presented in September 2021 at the EIB by Piero Esposito from Luiss University of Rome.

Using the EIBIS database, covering 12 000 EU firms, Esposito finds out that cash flow financing is important to finance traditional investment, especially in Southern Europe, whereas, in Western Europe, market based finance is important for both innovative and traditional investment. In Central and Eastern Europe, where cost effects seem to prevail, bank financing plays the main role.

Investment in information and communication technologies and product innovation is more sensitive to the financial structure, Esposito said. Therefore market based finance might help to fill the gap between Western European firms and firms from the two other EU regions as well as help them deleveraging after the COVID19 pandemic.

The question about the use of cash flow in relation with cultural factors/low entrepreneurial skills would require further research.

This is the third STAREBEI research grant with Luiss, one of the universities in the EU with which the Institute has a cooperation agreement.

STAREBEI (STAges de REcherche BEI-EIB research internships) is a programme that provides grants to universities in order to finance junior researchers carrying out research projects proposed by the EIB Group (EIB and EIF) under the joint supervision of a university tutor and an EIB or EIF co-tutor. To date, 63 young researchers from 41 universities in 14 European countries have benefited from the STAREBEI programme.