Determinants of Alternative Financing Development in the European Union
Abstract
Research background
Despite the growing significance of alternative finance (AF) in the European Union (EU), few studies have comprehensively analysed its drivers using recent panel data. Prior research often overlooks the combined impact of innovation, digitalisation, and regulatory conditions across the EU-27.
Purpose
This paper aims to discern the determinants that contribute to the development of AF within the EU.
Research methodology
The study employs panel regression analysis based on 162 observations across 27 EU countries, using indicators such as GDP per capita, the Global Innovation Index (GII), the Digital Economy and Society Index (DESI), the Index of Economic Freedom (IEF), and R&D expenditure. Model selection and robustness were ensured through the Breusch–Pagan LM test, the Hausman test, the Wooldridge test for autocorrelation, the Pesaran CD test for cross-sectional dependence, and the VIF for multicollinearity. K-means clustering was applied to identify countries with similar innovation and economic profiles.
Results
Innovation emerged as the strongest positive driver of AF, while GDP per capita had a limited positive influence. A negative relationship was found between AF and economic freedom, while digitalisation and R&D showed no significant effect.
Novelty
The study offers novel empirical evidence on AF determinants using a validated econometric model, revealing innovation as a more important driver than traditional economic or regulatory variables in the context of the EU.
© 2026 Daiva Jurevičienė, Lesya Kolinets, published by University of Szczecin
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