Collateral, mutual guarantees and the entrepreneurial orientation of SMEs. Issue 1 (7th August 2018)

• Record Type: Journal Article
• Authors: Beltrame, Federico; Floreani, Josanco; Grassetti, Luca; Mason, Michela Cesarina; Miani, Stefano
• Is Part Of: Management decision. Volume 57:Issue 1(2019)
• Page Start: 168
• Page End: 192
• Publication Date: 2018-08-07
• Subjects: Performance -- SME -- Entrepreneurial orientation -- Collateral -- Mutual guarantees; Management -- Periodicals; 658.403
• DOI: 10.1108/MD-11-2017-1077
• Languages: English
• ISSNs: 0025-1747

Abstract

Abstract : Purpose: The purpose of this paper is to investigate whether guarantees characterised by different degrees of relationship lending (particularly referring to collateral and guarantees provided by Mutual Loan Guarantee Institutions) are able to convey some entrepreneurial orientation (EO) dimensions from firms to banks. Design/methodology/approach: Exploiting data from a survey of Austrian and Italian SMEs, the empirical analysis is based on a sample of 328 small business firms. To test the signalling hypothesis, the authors used logistic regressions to assess the explanatory power of EO dimensions on the presence of several types of guarantees. Findings: The analyses suggest that collateral cannot signal any EO dimension, even when controlling for the strength of the bank – firm relationship. Furthermore, SMEs are able to mitigate their financial risk through collateral only in a multiple bank – firm relationship. Lastly, innovativeness, competitive energy and aggressiveness allow SMEs to obtain external guarantees (mutual guarantees, bank guarantees and public guarantees, respectively), helpful in order to promote credit access. Research limitations/implications: The mediation role of collateral and external guarantees on EO – credit access relation should be analysed in future research. Since the role of guarantees can change among different bank lending technologies, further studies should carefully consider lender's characteristics. Lastly, the use of loan data in respect of the firm data can help to better separate the effect of loan and firm attributes on the collateral. Practical implications: The study suggests how managers and entrepreneurs should manage the financial risk through collateral in different situations (one–to–one and multiple bank – firm relationship). Furthermore, depending on the level of innovativeness, competitive energy and aggressiveness, a firm should request a specific type of external guarantees in order to increment the credit availability, to maximise the possibility of success and to improve its performance. Originality/value: To the authors' knowledge, this paper is the first attempt to analyse whether EO affects the request for guarantees instead of credit access. This can be helpful especially when the banks involved in the relation apply a transaction lending technology.