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How do supply chain network and SMEs’ operational capabilities enhance working capital financing? An integrative signaling view

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  • Song, Hua
  • Yang, Xuan
  • Yu, Kangkang

Abstract

The problem of SME financing has always been a hot topic in both practical and academic fields. SMEs' financing difficulties stem from information asymmetry between lenders and borrowers. Nevertheless, a new development trend in business is that traditional lending appears to be giving way to supply chain finance, which greatly reduces information asymmetry and increases the possibility for SMEs to raise working capital. Drawing upon an integrative signaling view, this study identifies key factors that enable the information symmetry between SMEs and financial service providers (FSPs) and increase their financing performance in a business-to-business context by using multiple case studies based on qualitative data and social network (UCINET) analysis. It is found that SMEs with specific operational capabilities and the necessary level of network embeddedness will overcome the difficulty of information asymmetry by initially showing uncontrolled signals to FSPs in order to make themselves stand out from other unqualified firms. Moreover, FSPs will compensate for SMEs' deficiencies in both structural and relational embeddedness. The interaction of both SMEs’ operational capabilities and network embeddedness will jointly improve the availability of SME working capital.

Suggested Citation

  • Song, Hua & Yang, Xuan & Yu, Kangkang, 2020. "How do supply chain network and SMEs’ operational capabilities enhance working capital financing? An integrative signaling view," International Journal of Production Economics, Elsevier, vol. 220(C).
  • Handle: RePEc:eee:proeco:v:220:y:2020:i:c:s0925527319302579
    DOI: 10.1016/j.ijpe.2019.07.020
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    Cited by:

    1. Pan, Ailing & Xu, Lei & Li, Bin & Ling, Runze, 2020. "The impact of supply chain finance on firm cash holdings: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 63(C).
    2. Grzegorz Zimon & Dominik Zimon, 2020. "Quality Management Systems and Working Capital SMEs in GPO—A Case of Poland," Administrative Sciences, MDPI, vol. 10(4), pages 1-13, October.
    3. Hua Song & Yudong Yang & Zheng Tao, 2020. "How different types of financial service providers support small- and medium- enterprises under the impact of COVID-19 pandemic: from the perspective of expectancy theory," Frontiers of Business Research in China, Springer, vol. 14(1), pages 1-27, December.
    4. Su, Linlin & Cheng, Xusen & Hua, Ying & Zhang, Wenping, 2021. "What leads to value co-creation in reward-based crowdfunding? A person-environment fit perspective," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 149(C).
    5. Zhang, Wen & Yan, Shaoshan & Li, Jian & Tian, Xin & Yoshida, Taketoshi, 2022. "Credit risk prediction of SMEs in supply chain finance by fusing demographic and behavioral data," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 158(C).
    6. Dong, Ciwei & Chen, Chenyi & Shi, Xiutian & Ng, Chi To, 2021. "Operations strategy for supply chain finance with asset-backed securitization: Centralization and blockchain adoption," International Journal of Production Economics, Elsevier, vol. 241(C).
    7. Magni, Carlo Alberto & Marchioni, Andrea, 2020. "Average rates of return, working capital, and NPV-consistency in project appraisal: A sensitivity analysis approach," International Journal of Production Economics, Elsevier, vol. 229(C).
    8. Sarfraz Hussain & Van Chien Nguyen & Quang Minh Nguyen & Huu Tinh Nguyen & Thu Thuy Nguyen, 2021. "Macroeconomic factors, working capital management, and firm performance—A static and dynamic panel analysis," Palgrave Communications, Palgrave Macmillan, vol. 8(1), pages 1-14, December.

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