While the world needs to invest massively in renewable technologies, such as solar or wind energy, to address climate change and the growing demand for energy, the key actors of this transition - small innovative cleantech companies - are having a hard time to get funded.

 

In a new report for the European Investment Bank, Joëlle Noailly and her co-author Roger Smeets explores the financing constraints of small firms innovating in renewable energy. Looking at the balance sheets of 1,300 European firms patenting in renewable and fossil-fuel technologies over the 1985-2009 period, the authors find that small innovating firms specialized in renewable technologies face important financial constraints: their patenting activities are more sensitive to a shock in cash flows than other firms, suggesting that they mainly rely on internal finance to fund R&D. By contrast, other firms innovating in fossil-fuel technologies are less financially constrained and can more easily resort to external financing (debt or equity). Interestingly, the results are not explained by the fact that firms innovating in renewable energy may be smaller or younger than firms specialized in fossil fuels but seem rather due to the specificity of renewable technologies.

 

Read more about this research on the GGKP Insight Blog of the Green Growth Knowledge Platform.