Transformation towards a knowledge based economy with increased corporate innovation may directly affect bank financing. This research project will examine how banks screen loan applications from start-up enterprises, and how this impacts their financing structure. Using data from the KfW/ZEW Start-up panel and combining it with data from Creditreform we will relate the actual financing structure of start-ups to observable characteristics of the entrepreneur, as well as to the characteristics of banks which a start-up deals with. In addition, we will examine how external indicators of creditworthiness provided by credit bureaus affect access to bank finance. Comparing these relationships for innovative start-ups against others the project will study how banks weigh information on the ability, commitment and character (payment behavior) of the entrepreneur and whether this differs across bank types exhibiting different organizational structures. To our knowledge this will be the first study to relate the financing of start-ups to their own characteristics and the characteristics of their banks using panel data. The results of the project should provide important insights to policy makers on how the structure of the banking sector and credit information sharing affect start-up financing for innovative enterprises.

The research programme "Strengthening Efficiency and Competitiveness in the European Knowledge Economies (SEEK)" is funded by the State of Baden-Württemberg.

Additional information regarding the SEEK research programme.