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Inter-Firm Linkages and Finance in Value Chains

Author

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  • Navas-Alemán, Lizbeth
  • Pietrobelli, Carlo
  • Kamiya, Marco

Abstract

The literature on small and medium-sized enterprise (SME) finance highlights linkages with large firms in value chains as a possible way to enhance access to credit. However, much of the literature on value chains emphasizes issues of coordination and governance of those linkages and their effects on industrial upgrading with little mention to the financial implications for SMEs. This paper explores this gap by looking for evidence on the impact of SMEs' access to finance of inter-firm linkages and specifically interactions with large firms. Using original enterprise-level data in three different Latin American and Caribbean sectors and countries (agro-industry in Argentina, furniture in Brazil, and information and communications technologies in Costa Rica), a comparison between the different sources and instruments of finance used by SMEs is presented. A distinction is made between arm's length financial mechanisms based on "hard data" and relationship finance based on "soft data." Findings suggest that chain governance matters for the type of role large firms can play in enhancing SMEs' access to finance. Policies should take into account the type of chain governance between large firms and SMEs across industries and countries when providing incentives to increase the role of large firms as direct financiers or guarantee providers for SMEs.

Suggested Citation

  • Navas-Alemán, Lizbeth & Pietrobelli, Carlo & Kamiya, Marco, 2012. "Inter-Firm Linkages and Finance in Value Chains," IDB Publications (Working Papers) 4067, Inter-American Development Bank.
    • Handle: RePEc:idb:brikps:4067
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    References listed on IDEAS

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    Cited by:

    1. Jamil Paolo Francisco & Tristan Canare & Jean Rebecca Labios, 2018. "Obstacles and Enablers of Internationalization of Philippine SMEs Through Participation in Global Value Chains," Working Papers id:12905, eSocialSciences.
    2. Zhao, Lima & Huchzermeier, Arnd, 2019. "Managing supplier financial distress with advance payment discount and purchase order financing," Omega, Elsevier, vol. 88(C), pages 77-90.
    3. Finkelstein Shapiro, Alan & González Gómez, Andrés, 2017. "Credit market imperfections, labor markets, and leverage dynamics in emerging economies," Journal of International Money and Finance, Elsevier, vol. 78(C), pages 44-63.
    4. Anatoliy G. Goncharuk, 2017. "Wine Value Chains: Challenges and Prospects," Journal of Applied Management and Investments, Department of Business Administration and Corporate Security, International Humanitarian University, vol. 6(1), pages 11-27, February.

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    More about this item

    Keywords

    Global Value Chains; Finance; Small and Medium-sized Enterprises; SMEs; Relationship Finance;
    All these keywords.

    JEL classification:

    • F23 - International Economics - - International Factor Movements and International Business - - - Multinational Firms; International Business
    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • O14 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Industrialization; Manufacturing and Service Industries; Choice of Technology
    • O16 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - Financial Markets; Saving and Capital Investment; Corporate Finance and Governance

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