Regional Economics and Financing of Small and Medium-Sized Enterprises : Explanations for an East-West Gap in Germany? (Regionalökonomik Und Finanzierung Kleiner Und Mittlerer Unternehmen: Erklärungen Für Ein Ost-West-Gefälle in Deutschland?)

The financing of small and medium-sized enterprises (SMEs) plays a key role for the catching-up process of the East German economy after German reunification. German banks are often claimed to be too restrictive in their lending practices towards these firms. The present paper examines whether an East-West gap in lending to SMEs really exists and by which variables it can be explained. To find out the impact of location on credit risk and lending, we have to resort to regional economic theories. A review of regional economic explanations of birth, growth and death rates of SMEs provides variables to be included in future empirical research