The impact of inventory productivity on new venture survival

Abstract

PurposeThis paper explores the relationship between inventory productivity and the likelihood of venture survival and then examines how financial constraints moderate the inventory productivity–survival linkage.Design/methodology/approachAccelerated failure time (AFT) model is employed to study the link between inventory productivity and venture survival by using small- and medium-sized enterprise (SME) data from Chinese Annual Survey of Industrial Firms (CASIF) database over the period 1999–2007.FindingsThe paper demonstrates a converse U-curve relation between inventory productivity and venture survival. Additionally, financial constraints as the moderator weaken the marginal effect of inventory productivity on venture survival.Practical implicationsManagers should pay more attention to the important inventory performance indicator: inventory productivity. In the context of prominent financing difficulties, managers should be rapid to adjust the competitive strategy and optimize the internal production process according to the inherent nature of risks in a friction environment, and thus generate resources that enterprises cannot raise in the financial market.Originality/valueThis study may be the first to practically investigate the role of inventory productivity on venture survival and the moderating effect of financing constraints on this relationship. It adds to abundant articles as regards the interface between operation management and venture survival by exploring how financial constraints moderate the inventory productivity–survival linkage.