This paper develops a sociological perspective on the comparative study of risk in the bank financing of small and medium-sized enterprises (SME) in Britain and Germany. It combines an institutionalist analysis with Luhmann's (1993) and Douglas and Wildavsky's (1982) sociological theories of risk. Drawing on these theories, it is suggested that the decision-making process is a social process in which regulative, normative and cognitive institutional effects influence the perception and management of risk. Aspects of the institutional environment which relate to the bank financing of SMEs in general and risk management in particular are examined. The paper then reviews the evidence in this field presented in the existing secondary literature in the light of the theoretical approach developed and explores how various kinds of institutional mechanisms and other environmental factors influence aspects of decision making in relation to risk. The overall conclusions relate our findings to the literature on business systems.
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