TY - JOUR

T1 - Risk capital constraints to innovation in services

AU - Freel, Mark

AU - Robson, Paul

AU - Jack, Sarah

PY - 2014

Y1 - 2014

N2 - Purpose - We note a general and longstanding neglect of services in studies of innovation and a common focus of innovation studies on the availability of, and demand for, risk capital. Given these observations, the current paper is concerned with understanding the factors associated with perceptions of venture capital as a barrier to innovation in an important subset of knowledge-intensive service firms – technology-based business services.Design/methodology/approach - In exploring these issues, we draw on survey data collected from 264 technology-based service firms located in Scotland and Northern England. The data is subjected to bivariate and multivariate statistical techniques to help explore the extent of demand side risk-capital concerns.Findings - We find that smaller, faster growing and R&D intensive firms perceive of greater equity barriers. Moreover, firms who are relatively happy about the managerial competencies available to them, but who identify deficiencies in marketing skills and the availability of external debt finance (which may say something broadly about their financial neediness), are shown to be ‘needy’.Originality/value - Studies of venture capital demand are relatively rare. Studies involving innovative service firms are rarer still. Given the prominent role of service firms in advanced economies and the changing perspective of the role of services in innovation, studies of financial constraints to innovation in services are timely. Innovation policy in advanced economies continues to be premised on patterns identified in manufacturing industries. This paper contributes to a broader perspective that views [technology-based] business services as dynamic innovation actors.

AB - Purpose - We note a general and longstanding neglect of services in studies of innovation and a common focus of innovation studies on the availability of, and demand for, risk capital. Given these observations, the current paper is concerned with understanding the factors associated with perceptions of venture capital as a barrier to innovation in an important subset of knowledge-intensive service firms – technology-based business services.Design/methodology/approach - In exploring these issues, we draw on survey data collected from 264 technology-based service firms located in Scotland and Northern England. The data is subjected to bivariate and multivariate statistical techniques to help explore the extent of demand side risk-capital concerns.Findings - We find that smaller, faster growing and R&D intensive firms perceive of greater equity barriers. Moreover, firms who are relatively happy about the managerial competencies available to them, but who identify deficiencies in marketing skills and the availability of external debt finance (which may say something broadly about their financial neediness), are shown to be ‘needy’.Originality/value - Studies of venture capital demand are relatively rare. Studies involving innovative service firms are rarer still. Given the prominent role of service firms in advanced economies and the changing perspective of the role of services in innovation, studies of financial constraints to innovation in services are timely. Innovation policy in advanced economies continues to be premised on patterns identified in manufacturing industries. This paper contributes to a broader perspective that views [technology-based] business services as dynamic innovation actors.

KW - Innovation

KW - Small enterprises

KW - Service industries

U2 - 10.1108/JBIM-08-2013-0175

DO - 10.1108/JBIM-08-2013-0175

M3 - Journal article

VL - 29

SP - 476

EP - 486

JO - Journal of Business and Industrial Marketing

JF - Journal of Business and Industrial Marketing

SN - 0885-8624

IS - 6

ER -