SMEs, FDI and Capital Market Imperfections



This paper aims at exploring the problems experienced by SMEs in gaining access todebt and equity finance for FDI projects. We develop several hypotheses why SMEs areexpected to face severe financing constraints for foreign investments and provide anempirical analysis of these issues for a sample of 33 Belgian SMEs. The market of FDIfinance for SME is found to be subject to considerable capital market imperfections,which hinders small firms in their internationalization strategy and negatively affectstheir economic performance.


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Ingolf Dittmann