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How do macroeconomic dynamics affect small and medium-sized enterprises (SMEs) in the power sector in developing economies: Evidence from Turkey

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  • Sirin, Selahattin Murat
  • Uz, Dilek
  • Sevindik, Irem
Abstract
Developing economies are currently projected to hold a major share of the global energy demand in the upcoming decades, giving them a key role in addressing climate change. However, new renewable energy investments in these countries have so far been relatively slow. A specific set of challenges dominate the investment environment in developing countries, including higher exposure to macroeconomic and political risks, uncertainties due to climate change, limited domestic manufacturing capabilities, and heavy reliance on foreign debt in capital investments. These factors tend to disproportionately affect small and medium-sized enterprises (SMEs) which currently hold a sizeable share of renewable and distributed energy technology investments. Not only does this impact the viability of energy transition, but also has important energy justice and local economic development implications – an overlooked subject in the literature. Using a rich, novel dataset and panel data methods, this paper estimates the effect of a set of key macroeconomic variables on the capital structure and investment outcomes of SMEs within the Turkish power sector. Our results indicate that unfavorable macroeconomic conditions, which lead to a significant growth in liabilities and increased risk of bankruptcy, can cause a slowdown in power sector SME investments despite the prevalence of subsidies.

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  • Sirin, Selahattin Murat & Uz, Dilek & Sevindik, Irem, 2022. "How do macroeconomic dynamics affect small and medium-sized enterprises (SMEs) in the power sector in developing economies: Evidence from Turkey," Energy Policy, Elsevier, vol. 168(C).
    • Handle: RePEc:eee:enepol:v:168:y:2022:i:c:s0301421522003524
    DOI: 10.1016/j.enpol.2022.113127
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    More about this item

    Keywords

    Macroeconomic risks; Energy transition; Developing economies; SMEs; Renewable energy JEL M20; Q42; Q43;
    All these keywords.

    JEL classification:

    • M20 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Business Economics - - - General
    • Q42 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Alternative Energy Sources
    • Q43 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Energy - - - Energy and the Macroeconomy

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