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Accessibility and economic growth : a study of spatial differences in forest industry financing in British Columbia

University of British Columbia

The availability of sufficient finance for long term capital investment is generally conceded to be a prerequisite for economic growth. The present thesis questioned whether friction of distance hampers entrepreneur-borrowers and lending institutions during negotiations which precede long term loan agreements. It was reasoned that if the distance handicap were significant, then a study of growth experiences of similar capital intensive firms should show an association between slow growth and low accessibility to financial intermediaries. A literature review and discussions with officials at different financial institutions suggested various factors which could intervene in the hypothesized relationship, so the key hypotheses were modified accordingly. An interview survey was undertaken of principals of fifty small and medium-sized forest industry firms distributed over various regions of the province of British Columbia. In addition to data collected on formal questionnaires, a record of verbal comments made by respondents was compiled after each interview. Information from the questionnaires was processed by computer. In nearly all checks for association, rigorous tests of significance could not be applied because of the small sample and number of meaningful categories within variables. The questionnaire data and. interview records were used in a qualitative appraisal of the key questions of the study. The findings were that there was little difference in growth experiences of similar firms with greater spatial separation from financial intermediaries, at least for distances less than 250 miles. For longer transaction distances there was evidence of friction of distance. The limited evidence suggested distance constrained "borrowers of capital more than institutions, although indirect evidence suggested that institutions were not completely unaffected "by distance. The conclusion was that accessibility was a factor affected patterns of finance, but did not exert profound influence. Businessmen were able to overcome distance in search of credit if sufficient effort were applied. Financial institutions require particular information concerning proposed investments and the question of whether the institution had personnel capable of interpreting such information was of more importance than difficulties of information collection posed by distance. The thesis examines the relevance of the hypotheses in the context of other major changes affecting the British Columbia forest industry.

Text

2010-02-26

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http://hdl.handle.net/2429/20969

Geography

University of British Columbia

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