Abstract
Financing is a critical bottleneck problem in the development process of SMEs. SMEs’ business activities are more closely embedded in the network, because the geographical location closeness facilitates the exchange of information and the diffusion of knowledge. We try to explore how the cluster network relations affect the efficiency of SMEs external financing efficiency. This paper takes a close look at firm financing patterns and factors that influence external financing performance of SMEs in clusters. However, our results suggest that financing from bank is the main financing pattern. We also find inter-firm trust is positively related with external financing efficiency and this positive relationship is moderated by the level of Guanxi. Theoretical and managerial implications are discussed.
Highlights
The literature suggests that relationship plays an important role in financing and government mechanism in China (e.g. Allen, Qian, Qian, 2005; Tsai, 2002)
To solve the above problems, this paper explores how the cluster network relations affect the efficiency of SMEs external financing efficiency
The literature on inter-organizational relations offers two general definitions of trust: one is the willingness to rely on an exchange partner in whom one has confidence (e.g. Moorman et al 1992) [5]
Summary
The literature suggests that relationship plays an important role in financing and government mechanism in China (e.g. Allen, Qian, Qian, 2005; Tsai, 2002). Financing is a critical bottleneck problem in the development of SMEs. SMEs’ business activities are more closely embedded in the network because its geographical location closeness promotes the exchange of information and the dissemination of knowledge. SMEs’ business activities are more closely embedded in the network because its geographical location closeness promotes the exchange of information and the dissemination of knowledge This brings advantages to business innovation capability and competence. To solve the above problems, this paper explores how the cluster network relations affect the efficiency of SMEs external financing efficiency. This paper aims to investigate the interaction between Guanxi (inter personal relationship) and Trust (inter firm trust) and their influence on access to financing resources, and give a clear explanation of how SMEs get financing benefits in clusters especially in Wenzhou area. We present the results of the study and discuss their implications
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