This paper introduces a special issue of small Business Economics on ‘Financing and Small Firm Dynamics’. It establishes a general underpinning for the analysis of small firm financing over time. This appeals to the control theoretic literature, and permits the specification of ‘master trajectories’ of key variables over time like output, debt, dividend and capital. Two trajectories (for cheap debt, and cheap equity, respectively) illustrate this type of analysis, showing how financial structure can vary over time, involving phases of growth, consolidation and stationarity. From this perspective, six papers on small firm dynamics and finance are reviewed. Issues addressed include: credit constraints (funding shortages), wealth as collateral, financial structure, target income modelling of start-up, and bank lending during financial liberalisation.
- industrial organization