International Journal of Social Science & Economic Research
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Title:
THE FIRM RISK STRUCTURE, INNOVATION, AND ACCESS TO CREDIT NEXUS IN THE EAST AFRICAN COMMUNITY: THE CASE OF SMALL AND MEDIUM SCALE ENTERPRISES

Authors:
Ronald Kasaijja , John Bbale Mayanja and Steven Mayende

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RonaldKasaijja 1 , John Bbale Mayanja2 and Steven Mayende3
1,2. Makerere University, School of Economics, P.O. BOX 7062, Kampala, Uganda.
3. Makerere University, School of Economics, Department of Policy and Development Economics, P.O. BOX 7062, Kampala, Uganda,

MLA 8
Kasaijja, Ronald, et al. "THE FIRM RISK STRUCTURE, INNOVATION, AND ACCESS TO CREDIT NEXUS IN THE EAST AFRICAN COMMUNITY: THE CASE OF SMALL AND MEDIUM SCALE ENTERPRISES." Int. j. of Social Science and Economic Research, vol. 7, no. 5, May 2022, pp. 1322-1347, doi.org/10.46609/IJSSER.2022.v07i05.012. Accessed May 2022.
APA 6
Kasaijja, R., Mayanja, J., & Mayende, S. (2022, May). THE FIRM RISK STRUCTURE, INNOVATION, AND ACCESS TO CREDIT NEXUS IN THE EAST AFRICAN COMMUNITY: THE CASE OF SMALL AND MEDIUM SCALE ENTERPRISES. Int. j. of Social Science and Economic Research, 7(5), 1322-1347. Retrieved from doi.org/10.46609/IJSSER.2022.v07i05.012
Chicago
Kasaijja, Ronald, John Bbale Mayanja, and Steven Mayende. "THE FIRM RISK STRUCTURE, INNOVATION, AND ACCESS TO CREDIT NEXUS IN THE EAST AFRICAN COMMUNITY: THE CASE OF SMALL AND MEDIUM SCALE ENTERPRISES." Int. j. of Social Science and Economic Research 7, no. 5 (May 2022), 1322-1347. Accessed May, 2022. doi.org/10.46609/IJSSER.2022.v07i05.012.

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ABSTRACT:
The paper investigates the nexus between the firm’s risk structure, innovation, and access to credit by SMEs in the EAC using the World Bank Enterprise Survey data collected between 2011 and 2014. The overall results are based on the Heckman Probit Model and provide evidence that Innovation increases the likelihood of accessing credit from financial institutions by 4.2% statistically significant at all conventional levels. In addition, the presence of risk reduces the chances of accessing credit by 1.9% statistically significant at 5% conventional level. Furthermore, study findings show that the chances of accessing credit are lower for smaller firms compared to medium firms while they increase for firms owned and operated by women. In regards to the age of the firm, the older the firm, the higher the chances of accessing credit from financial institutions. The study recommends an increase in government support for research activities, as well as strengthening the linkages between the various research institutes and firms to enhance both product and process innovation directly and indirectly through the spillover effect. The paper also proposes the enhancement of knowledge on risk management among entrepreneurs and also building a risk management culture whereby employees and other stakeholders consider risks in their decisions.

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