How can SMEs acquire supply chain financing: the capabilities and information perspective
| DOI | https://doi.org/10.1108/IMDS-02-2019-0072 |
| Date | 14 February 2020 |
| Published date | 14 February 2020 |
| Pages | 784-809 |
| Author | Qiang Lu,Beini Liu,Hua Song |
| Subject Matter | Information & knowledge management,Information systems,Data management systems,Knowledge management,Knowledge sharing,Management science & operations,Supply chain management,Supply chain information systems,Logistics,Quality management/systems |
How can SMEs acquire supply
chain financing: the capabilities
and information perspective
Qiang Lu and Beini Liu
School of Business, Beijing Technology and Business University, Beijing, China, and
Hua Song
School of Business, Renmin University of China, Beijing, China
Abstract
Purpose –This paper aims to explore how innovation capability and market response capability of small and
medium-size enterprises (SMEs) affect their supply chain financing performance (SCFP) through supply chain
financingsolutions (SCFS) adoption. At thesame time, the mechanismby which supply chain financing reduces
information asymmetry before (ex-ante) and after (ex-post) SCFS adoption to promote SCFP is also inquired.
Design/methodology/approach –Drawing on enterprise competence theory, this paper proposes a
theoretical model and tests it using survey data from a sample of 218 SMEs in China. Multiple regression
analysis is employed to test the hypothesis.
Findings –The study finds that: (1) SMEs’innovation capability and market response capability positively
affect SCFP. (2) SMEs’innovation capability and market response capability exert significantlypositive effects
on SCFS adoption. (3) SCFS adoption plays a mediating role between SME capabilities and SCFP. (4) Supply
chain integration (SCI) and information technology application have no moderating effects on the relationship
between SME capabilities and SCFS adoption. Finally, (5) SCI and information technology application have
positive moderating effects on the relationship between SCFS adoption and SCFP.
Originality/value –Based on enterprise competence theory, this study sheds light on the internal mechanism
through which SMEs’capabilities affect SCFP by introducing SCFS adoption and explores the role of
situational factors in SCF in reducing ex-ante and ex-post information asymmetry. This study provides an
innovative theoretical perspective on supply chain financing and enriches the existing research.
Keywords Supply chain financing, SME capability, Information asymmetry,
Supply chain financing performance
Paper type Research paper
Introduction
According to the data from the State Administration for Industry and Commerce of China, by
the end of November 2018, China had 109 million market entities, among which 90 percent are
small and medium-size enterprises (SMEs). The value of final products and services created
by SMEs accounts for about 60 percent of the national GDP, and 50 percent of the national tax
revenues come from SMEs. SMES have become an integral part of China’s economy and are
becoming driving forces of rapid economic growth. However, financing difficulties have been
restricting the development of SMEs for a long time.
Studies have shown that information asymmetry is a main reason SMEs find it difficult
and costly to acquire financing (Berger and Udell, 2006;Song et al., 2019). Transaction lending
and relationship lending have emerged in management in order to solve the problem of
information asymmetry. In transaction lending, financial institutions usually review the loan
qualifications of SMEs based on “hard information,”such as financial statements, market
IMDS
120,4
784
The research underlying this paper was supported by the National Natural Science Foundation of China
(No. 71902007), Beijing Natural Science Foundation (No. 9204022), Beijing Social Science Foundation
(No. 19GLC075) and Social Science Program of Beijing Municipal Education Commission (No.
SM202010011005).
The current issue and full text archive of this journal is available on Emerald Insight at:
https://www.emerald.com/insight/0263-5577.htm
Received 19 February 2019
Revised 15 September 2019
25 November 2019
Accepted 14 January 2020
Industrial Management & Data
Systems
Vol. 120 No. 4, 2020
pp. 784-809
© Emerald Publishing Limited
0263-5577
DOI 10.1108/IMDS-02-2019-0072
information, and income tax information (Stein, 2002). The hard information of SMEs is often
difficult to quantify due to their short operational lives, incomplete financial statements, small
asset size, and high uncertainty (Irwin and Scott, 2010;Roberts, 2015). Therefore, commercial
banks will impose stricter requirements on collaterals or guarantees for SMEs due to higher
default risks (Duan et al., 2009), thus increasing SMEs’costs for and difficulty in obtaining
working capital supplements (Song and Wang, 2013). Relationship lending is based on “soft
information”such as the relationship between the banks and SMEs (Berger and Udell, 2002)
and the interrelationships between SMEs in the cluster environment (Shane and Cable, 2002;
Song and Wang, 2013). It takes a long time for banks and SMEs to establish mutual trust
through repeated interactions (Fiordelisi et al., 2014;Gobbi and Sette, 2014). However, as
banks don’t participate directly in operations of SMEs after relationship lending, the problem
of moral hazard remains unsolved (Chang et al., 2014).
In recent years, SMEs have been increasingly relying on supply chain finance (SCF) to
solve their financing problems (Hofmann and Kotzab, 2010;Yan and Sun, 2015;Lekkakos
and Serrano, 2016). SCF aimed at optimizing financial flows at an interorganizational level
(Pfohl and Gomm, 2009;Hofmann et al., 2018) through solutions implemented by financial
institutions (Camerinelli, 2009) or technology providers (Lamoureux and Evans, 2011). The
ultimate objective is to align financial flows with product and information flows within the
supply chain, improving cash-flow management from a supply chain perspective (Wuttke
et al., 2013;Caniato et al., 2016). In addition, SCF emphasizes the transaction credit generated
by the borrower enterprise based on the whole supply chain structure (Wandfluh et al., 2016),
which makes network connections more compact, frequent, and stable (Song et al., 2018).
Therefore, SCF can reduce information asymmetry between borrowers and lenders as well as
lessen the moral hazard problem, thereby reducing financing costs, improving the
availability of financing, and ultimately enhancing SMEs’financing performance.
Many studies indicate that SCF can help SMEs acquire financing and ease capital
constraints, thus enhancing their performance (Pfohl and Gomm, 2009;Zhao et al., 2015;
Gelsomino et al., 2016). However, in fact, some SMEs can attain good supply chain financing
performance (SCFP) by adopting supply chain financing solution (SCFS), while others cannot.
In addition, the promotion of SCFP reflects different aspects, such as more reasonable
financing interest rate, lower mortgage rate, and more flexible financing period and volume
(Gomm, 2010;Tagoe et al., 2005;Song and Wang, 2013). However, previous studies have
mainly focused on how SMEs can promote SCFP through SCF, but have been silent on what
kind of SMEs can use SCF to promote SCFP.
Different SMEs have different capabilities. According to the competence theory, an
enterprise’s own competence is the key to its competitive advantage and performance
(Prahalad and Hamel, 1990;Grant, 1991;Miller, 2003;Ray et al.,2004). Improving the
enterprise’s capability will help it acquire and maintain competitive advantages, which
positively affects its performance (Ritter et al., 2004). In SCF, then, how an SME’scapability
affectsits SCFP by influencingits SCFS adoption isa theoretical issue thatneeds to be explored.
The theory of enterprise competence provides an appropriateperspective for our research.
In addition, previous studies have shown that SCF can promote the adoption of SCFS
among SMEs by reducing information asymmetry, thus improving their SCFP (Hofmann and
Kotzab, 2010;Pfohl and Gomm, 2009). However, the internal mechanism by which
information asymmetry can be reduced in SCF has seldom been studied, and empirical works
on the question are even fewer (Gelsomino et al., 2016). Therefore, this is another important
matter that needs to be explored. Moreover, most credit theories have divided information
asymmetry into two types: ex-ante and ex-post information asymmetry (Donnelly et al., 2014).
This study will also explore how SCF can effectively reduce the information asymmetry
before SCFS adoption (ex-ante) and after SCFS adoption (ex-post) between SMEs and fund
providers so as to improve SCFP of SMEs.
Supply chain
financing of
SMEs
785
To continue reading
Request your trial