Does planned innovation promote financial access? Evidence from Vietnamese SMEs

The study examines the feedback effect of innovation outcomes on access to finance, as an extension to the existing literature which suggests financial access drives firms to innovate. The study applies the theory of planned behaviors integrated with the signaling theory to evaluate financial access of Vietnamese firms in connection to their innovation with a particular focus on planned innovation activities—innovation activities that started out with an entrepreneurial intention to innovate. Applying the multilevel mixed-effects logistic (MELOGIT) regression for panel and the two-stage probit model within the conditional mixed process (CMP) to the data on Vietnamese small and medium firms, for the period 2005–2015, the study shows that firms with innovation outcomes appear to have better access to finance. More interestingly, the effect is stronger for planned innovation. These findings assert the signaling role of planned innovation to potential lenders on a comprehensive resource commitment guiding the innovation activity to success. The study offers interdisciplinary arguments from both financial risk perspective and theory of planned behavior integrated with the signaling view.