Inter-firm Linkages Research Articles

Capitalizing on the CFO: Interfirm Linkages and Foreign Debt Capital in Emerging Markets

Capitalizing on the CFO: Interfirm Linkages and Foreign Debt Capital in Emerging Markets

Untangling cross-border interfirm effects in SMEs’ working capital financing: A cyber-behavioral signaling perspective

This study analyzes the intricate dynamics of cross-border interfirm interactions in the working capital financing of small and medium-sized enterprises (SMEs) by using a novel cyber-behavioral signaling perspective. It emphasizes the pivotal role played by the generation and transmission of credible signals to mitigate informational disparities inherent in SME finance. While extant literature predominantly focuses on physical-centric signal types, our work sheds light on SMEs’ strategic use of behavioral factors in the network ecology to generate and transmit signals. Grounded in signaling theory and informed by network ecology, we propose that network ecology constitutes a fertile environment for SMEs to effectively communicate their creditworthiness through high-quality signals. Using survey data from 276 Chinese SMEs, our empirical analysis reveals that cross-border interfirm effects—both unintentional network spillover and intentional network transitivity—significantly bolster SME financing outcomes. Leveraging digital knowledge repositories mediates the strength and effectiveness of these signals, and exerts an even stronger positive impact on SME working capital financing in the absence of well-established normative mechanisms in the wider business ecosystem. By integrating a cyber-behavioral dimension into signaling theory within the SME financing domain, this research offers new understanding on how SMEs can harness the untapped power of their interconnected relationships to secure external capital. The study contributes to theory and practice by elucidating pathways for SMEs to navigate complex interfirm linkages to facilitate improved access to working capital.

SME upgrading in emerging market clusters: The case of Taiwan’s bicycle industry

Existing arguments on the economic upgrading of small and medium-sized enterprises (SMEs) in emerging markets emphasise the role of multinational enterprises (MNEs) from developed markets in providing the necessary new knowledge based on a top-down logic. Adopting the Taiwanese bicycle industry cluster as a case study, we investigate alternative factors influencing the upgrading of SMEs in emerging markets through vertical and horizontal relationships within global value chains and clusters. The findings show that knowledge exchange and collaboration via horizontal, trust-based linkages between SMEs within a cluster and the development of formal and informal institutions by leading local MNEs are crucial for the upgrading of locally clustered SMEs. We provide typologies for vertical and horizontal interfirm linkages and show how the combination of linkages affects the upgrading of these emerging market SMEs. Our typologies can assist practitioners with identifying options for successful upgrading through strategic engagement and development in interfirm relationships.

DEVELOPMENT LINKAGES OF BRUNEI DARUSSALAM’S COFFEE AND TEA SECTOR: GLOBAL AND REGIONAL VALUE CHAIN PERSPECTIVES

The development of agriculture and agrifood-based products is at the forefront of Brunei Vision 2035, Brunei Darussalam’s most aggressive economic drive to date. One such instance of agri-food production is locally made coffee and tea products, which is taking place in the country despite the limited amounts of domestic raw materials available. The presence of this sector in the market, therefore, warrants further investigation. This case study uses Michael Porter’s Value Chain Analysis (VCA) and Gereffi’s Global–Regional Value Chain (GRVC) theory to analyze Brunei’s coffee and tea Micro, Small, and Medium Enterprises (MSMEs) by mapping and tracing the origins of inputs; identifying local and regional value-adding processes; and pinpointing firms’ strategies towards building their capacities and capabilities. The aim is to establish the competitiveness of this sector against regional and global well-known brands. As such, this paper highlights inter-firm linkages of coffee and tea production in Brunei and positions Brunei’s firms in Shih’s GVC smiling curve, relative to its partners based on levels of value-addedness and functional complexities. While limited to conventional coffee and tea producers, this study provides a starting point in the hybrid use of VCA and GRVC to understand local–regional development linkages that exist in small national economies like Brunei Darussalam which are necessary for firms to remain competitive. It also contributes to policy learning and knowledge enrichment for the government, consumers, and industrialists alike, by highlighting the lessons gained from this sector’s experiences.

Mediating role of inter-firm linkages and innovation capability towards the sustainability of SMEs in Indonesia

Mediating role of inter-firm linkages and innovation capability towards the sustainability of SMEs in Indonesia

Common analyst links and predictable returns: Evidence from China

Based on shared analyst coverage, we are the first to document the common-analyst momentum (CAM) effect in China. Empirically, we show that average returns of common-analyst peer firms have strong predictive power for future focal firm returns. Moreover, the CAM effect is stronger than other cross-asset momentum (XAM) effects. Interestingly but differently, the CAM cannot unify other XAM effects as the U.S. market does. Exploiting the underlying mechanism, we find that common-analyst-connected firms are fundamentally similar. Further, the CAM effect is stronger when inter-firm linkages are stronger when the information processing task is more complex and on earnings announcement dates. We conclude that sluggish analyst forecasting and investors’ attention constraint could contribute to the stronger CAM effect, and our results support the hypothesis that slow information diffusion generates the CAM effect.

The Impact of Interfirm Linkages on Chinese MNEs’ Entry into Foreign Markets

The Impact of Interfirm Linkages on Chinese MNEs’ Entry into Foreign Markets-Linkage, Strategic Alliance, Outward Foreign Direct Investment (OFDI), Location Choice, Internationalization Process Model (IPM)

The Role of Technology in Increasing Competitiveness: An Examination of the Indian Garment Clusters

In this article, we examine the Indian garment industry to examine the effect of clusters on the sales of this industry. The data has been collected through a primary survey in five garments clusters in India. The variable that is significant in explaining sales in most equations is technology proxied by imported machinery. It has been argued that inter-firm linkages and linkages between firms, service providers and institutions are crucial for competitiveness and this is best achieved through a cluster. Studies on clusters have shown that some clusters have been able to deepen their inter-firm division of labour, raise their competitiveness and break into international markets. The development of the cluster in India has followed the ‘top-down’ approach and the natural process through which linkages are developed are yet to occur in most clusters. JEL Codes: F14, L67, L23

Creative city networks: A social network analysis of a virtual community of designers in China

Inter-firm linkages have been commonly applied to measure urban relations. However, this is believed to be less suited to the study of today's project-based and people-centred production network of creative sectors. This paper aims to re-delineate creative city networks by highlighting the role of social relations in representing the inter-city links in cultural production. Using a large number of interpersonal connections extracted from a virtual community of designers in China (Zcool), we demonstrate the architectural features of this specialised urban network and probe for explanatory factors with regard to its centrality and connectivity. Our findings suggest that the structure of urban networks in design communities in China is polycentric, with a few large cities dominating the network. The centrality of cities is highly dependent on their economic and political power but does not necessarily follow the existing urban hierarchy. The presence of super celebrities plays a more important role than the size of the population. Moreover, it is the real-world communications arising from transport connectivity, cultural homogeneity, and economic closeness rather than geographical proximity that determines the strength of inter-city connectivity in virtual communities of designers. The paper contributes to current scholarship about urban networks in cultural production by adding a ‘socialised’ account in the conceptualisation of creative city networks and a better understanding of the formation mechanism of such networks.

His Pain Is Your Gain: Inter-Firm Linkages and Exchange Rate Exposure

His Pain Is Your Gain: Inter-Firm Linkages and Exchange Rate Exposure

A multidimensional perspective on child labor in the value chain: The case of the cocoa value chain in West Africa

The International Labor Organization (ILO) states that most agricultural work carried out by children occurs within the family unit, is generally unpaid and often hazardous in its nature and/or in the circumstances in which it is carried out. At the same time, some scholars nuance this view by positing that children who work in agriculture in the spheres of their own household are not necessarily exploited. Making progress in addressing (worst forms of) child labor by value chain actors necessitates unpacking the complex dynamics, context and interlinkages that connect firms and farms at the local community level. This study responds to this call by proposing a new multidimensional perspective on child labor based on comparing and contrasting Global Value Chain (GVC) literature and the Sustainable Livelihood Approach (SLA). Adopting such a perspective allows for an explanation of both vertical dynamics, including global inter-firm linkages and power distribution, as well as horizontal dynamics, such as local norms and values, access to capitals and livelihood trajectories that contribute to the occurrence of child labor. This framework is illustrated by a case study on child labor in the cocoa value chain in Ghana and Côte d’Ivoire, based on information obtained from a variety of sources, including 38 key informant interviews, 12 focus group discussions and structural observations. This study shows that children are not only factors of production, but are socially embedded in family structures and local communities. Children participate in a wider range of rural and agricultural activities as part of rural upbringing and learning a livelihood, in which not only harms but also benefits can occur. These findings advance the discussion by moving away from a dichotomy on child labor as a good or bad practice and putting the development opportunities of children center stage.

How Do Nationalism and Immigrant Entrepreneur Assimilation Impact Firms' Survival?

Resource dependence theory posits that firms are dependent on their environment for survival. Firms' survival becomes challenging when the environment changes and affects the supply of critical resources and firms' network of interdependencies. One proposed mechanism to manage resource dependency and increase survival probability is to loosen dependencies on other firms. We extend the literature and investigate the circumstances under which tightly coupled interfirm linkages and high dependencies reduce uncertainty and increase firms' survival. We focus on immigrant-owned firms in the context of rising nationalism and propose that nationalism impose constraints on immigrant-owned firms' transnational and international networks. Consequently, immigrant-owned firms' survival becomes highly dependent on developing a network of interdependencies with firms in the domestic market. Yet, firms' attributes on which immigrant-owned firms create their dependencies on and the extent of immigrant entrepreneur assimilation have differing effects on firms' survival.

Upgrading under globalization in health-related industries in Tanzania: the case for dynamic industrial deepening

ABSTRACT Globalization of markets and production networks has made it progressively harder for low income countries to industrialize. This article addresses a conundrum facing industrial firms and industrial policy in a low-income African country: how to achieve upgrading necessary for sustained competitiveness. Using data from a study of manufacturers of health products in Tanzania, we document the double ‘squeeze’ on firms’ profits exerted by sharp price competition alongside competitive pressure for rising product quality within globalized markets. Drawing on Sutton’s model of competing on capabilities, and the sectoral systems of innovation and production framework, we argue that ‘dynamic industrial deepening’, strengthening domestic inter-firm linkages, is a key requirement for sustainable development of these health industries. We present evidence that sectoral industrial support for the health industries can promote sustainable technological upgrading, and reflect on the challenge of building developmental linkages where external investment to support upgrading is transforming existing business structures.

Structural change and digitalization in developing countries: Conceptually linking the two transformations

In the wake of digitalization it is increasingly debated whether developing countries can achieve economic prosperity through industrialization in the same manner as developed countries did. At the same time, developing countries have high hopes for digital technologies to drive the transformation of the economy towards prosperity. Literature on structural change views technology as one driver of employment shifts between economic sectors, but underlying mechanisms are often overlooked. Similarly, evidence on digitalization highlights its impacts on employment, but the causes and effects require further investigation. As a consequence, both strands of literature benefit from an integrated perspective on structural change and digitalization, which has largely been lacking. Hence, we pose the following research question: What are potential linkages between structural change and digitalization? Based on a review of the existing literature we identify the drivers of structural change as well as the economic impacts of digitalization on these drivers. We then elaborate on linkages between both strands of literature, showing that digitalization impacts the drivers of structural change in various ways. Evidence suggests that digitalization is likely to affect relative sectoral productivity, but it is questionable whether destinations of subsequent labor movements (e.g. towards traditional services) will equally benefit from technological progress. Moreover, the skill bias of digital technologies may be a risk not only for equitable income gains, but also for inter-firm linkages. Our review further implies that digitalization fosters the servicification of manufacturing and presents opportunities for developing countries to diversify in traded goods and services. However, it is contested if digitalization facilitates better positioning of developing countries in global markets, or if it narrows the scope for their participation and upgrading opportunities in global value chains due to relatively larger benefits for developed countries. We thus highlight various differences between developed and developing countries in the ability to benefit from digitalization. Future studies can empirically test the proposed linkages to reveal technology-, country- and industry-specific interactions between processes of structural change and digitalization.

Financial Crises, Firm-Level Shocks, and Large Downturns: Evidence From Greece

How do firm-specific shocks contribute to large economic downturns associated with financial crises? Using a large and representative dataset on Greek firms covering all sectors of the economy over the period 2000-2014, we find that the contribution of firm-specific shocks to the volatility of aggregate sales growth increased substantially (about 30%) during the Greek financial crisis and dominated the contribution of macroeconomic and sectoral shocks. We also find that, throughout the sample period, inter-firm linkages are two and a half times as important as the direct effect of firm shocks in driving aggregate fluctuations. However, during the financial crisis, the Greek economy became more granular and the direct effect of firm-specific shocks had increased importance in driving aggregate volatility.

Creditworthiness and access to finance of SMEs in Malaysia: do linkages with large firms matter?

PurposeThis study investigates the influence of inter-firm linkages between small and medium enterprises (SMEs) and large firms on the relationship between an SME's creditworthiness and its access to finance.Design/methodology/approachSurvey questionnaire was distributed to 456 SMEs in the manufacturing sector in the Selangor and Federal Territory of Kuala Lumpur regions and a total of 145 useable responses were gathered. Investigation into the possible differences in the effect of creditworthiness – and its dimensions – on access to finance for SMEs with and without linkages are examined using Partial Least Squares-Multi Group Analysis (PLS-MGA).FindingsIt is found that the relationship between creditworthiness and access to finance is significant for both SMEs with and without links to large firms. However, no significant difference is found in the effect of creditworthiness on access to finance for both types of SME. Further analysis on the five different dimensions of creditworthiness shows statistically significant differences between SMEs with links and those without for the dimensions of collateral and condition. This implies that alliances formed between SMEs and large firms do not have much of an influence on the overall creditworthiness but do influence the collateral and condition of the SME.Originality/valueThis study contributes to the understanding of the effects of interfirm linkages on SME creditworthiness and access to finance. To the authors' knowledge no such study has been conducted on links between SMEs and large firms, especially in a developing country such as Malaysia.

Strategic Alliance and Its Influence on the Performance of Small- and Medium-scale Enterprises in Enugu State, Nigeria

Small- and medium-scale enterprises (SMEs) are the engine of economic growth and equitable development in emerging economies such as Nigeria. Their role in emerging market development can be seen in the areas of capital saving, utilization of local resources, and job creation among others. Enugu State is one of the emerging industrial hubs in Nigeria with SME base of 1,366. The activities of these enterprises have significantly increased the revenue base of the government, making the area an emerging market economy. This study assessed the influence of strategic alliance on the performance of SMEs in Enugu State. A quantitative approach comprising of field observations, reference to relevant literature, and questionnaire survey of 137 SMEs was adopted for the study. Data were analyzed using multiple linear regression. The results revealed that strategic alliance cumulatively led to 0.55 unit increase in sales growth, 0.58 unit increase in growth in market share, and 0.56 unit increase in product success. The result also revealed that that strategic alliance led to 0.76 unit increase in growth in profit, 0.62 unit increase in the number of employees, and 0.73 unit increase in labor productivity at 0.05 level of confidence. The article suggests that institutionalization of strategic alliance would encourage cooperation and interfirm linkages among SMEs and create a niche market for them.

Mapping Urban Networks through Inter-Firm Linkages: The Case of Listed Companies in Yangtze River Delta, China

Recently, literature on urban network research from the perspective of ?rm networks has been increasing. This research mainly used data from the headquarters and branches of all 2581 listed manufacturing companies in the Yangtze River Delta from 1990 to 2017, and studied the urban network through an interlocking network model that quantifies the links between enterprises. The results showed that the spatial distribution of listed manufacturing industries in the Yangtze River Delta was relatively concentrated, and cities such as Shanghai, Nanjing, and Hangzhou were hot spots for the spatial distribution of listed manufacturing industries. However, Fuyang, Suqian, Chizhou, Lishui and other network edge cities were less distributed in manufacturing. The urban network of the Yangtze River Delta has significant hierarchical characteristics. The urban network of the Yangtze River Delta presents a multi-center network development mode with Shanghai as the center and Nanjing, Hangzhou, and Hefei as the sub-centers. Moreover, we found that the development of inter-city connections in the Yangtze River Delta was driven by network mechanisms of priority attachment and path dependence. The radiating capacity and agglomeration capacity of cities in the Yangtze River Delta have a strong polarization characteristic. The core cities such as Shanghai, Nanjing, Hangzhou, and Hefei have much higher network radiation capabilities than network aggregation capabilities. However, other non-core cities and network edge cities have weak network radiation capabilities, and mainly accept network radiation from core cities. It enriches the research of urban networks based on real inter-?rm connections, and provides ideas for the wider regional study and the combination of econometric techniques and social network analysis.

Mapping Urban Networks through Inter-Firm Investment Linkages: The Case of Listed Companies in Jiangsu, China

Recently, literature on urban network research from the perspective of firm networks has been increasing. Focusing on firms’ multi-location distribution, existing studies use mainly the internal organization structural information of firms to portray one-type industry or all-industry networks, and there are deficiencies in reflecting the authenticity of networks and comparing the differences across industries. In contrast to studies applying intra-firm networks, this study collects real investment data of all listed firms in Jiangsu Province and studies urban networks through quantifying inter-firm linkages. Based on inter-firm investment linkages, this study provides fresh insights on inter-city connections in China. The results show that Nanjing, Suzhou, Shanghai, Beijing and Shenzhen are the constant network centers across different industries. Particularly, Shenzhen has been favored by more investment inflows far beyond its GDP. In China’s unique institutional context, state power, geographical location, market and other factors jointly affect the flow of investment, and the role of state power deserves special attention. Since real economic connections are used to describe urban networks, the findings might contribute to ongoing debates regarding economic centers in China and bring further implications for policy making in investment environment improvement. It enriches the research of urban networks based on real inter-firm connections, and provides ideas for the wider regional study and the combination of econometric techniques and social network analysis.

How does distance affect market entry mode choice? Evidence from French companies

The objective of this article is to examine the relevant dimensions of distance for foreign market entry mode choice. Based on a sample of 203 interfirm linkages formed by French multinationals with partners across the world, we analyze the impact of four dimensions of distance on the choice between cooperative alliances and mergers-acquisitions. The findings indicate that administrative and economic distance have a significant influence on market entry mode choice, whereas the impact of cultural and geographic distance is not significant. They further highlight the important role of the host country's government effectiveness for market entry mode decisions.