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

Shaista Wasiuzzaman (Universiti Teknologi Brunei, Gadong, Brunei Darussalam)
Nabila Nurdin (Faculty of Managemement, Multimedia University–Cyberjaya Campus, Cyberjaya, Malaysia)
Aznur Hajar Abdullah (Faculty of Managemement, Multimedia University–Cyberjaya Campus, Cyberjaya, Malaysia)
Gowrie Vinayan (School of Social Sciences, Heriot-Watt University Malaysia, Putrajaya, Malaysia) (Heriot-Watt University, Edinburgh, UK)

Journal of Small Business and Enterprise Development

ISSN: 1462-6004

Article publication date: 6 March 2020

Issue publication date: 16 April 2020

Abstract

Purpose

This 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/approach

Survey 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).

Findings

It 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/value

This 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.

Keywords

Acknowledgements

Funding: This research is funded by the Ministry of Higher Education Malaysia, under the Fundamental Research Grant Scheme (FRGS) [grant number FRGS/1/2014/SS05/MMU/02/4]. The authors would like to thank the anonymous reviewers and the Editor for their constructive feedback which greatly benefited this manuscript.

Citation

Wasiuzzaman, S., Nurdin, N., Abdullah, A.H. and Vinayan, G. (2020), "Creditworthiness and access to finance of SMEs in Malaysia: do linkages with large firms matter?", Journal of Small Business and Enterprise Development, Vol. 27 No. 2, pp. 197-217. https://doi.org/10.1108/JSBED-03-2019-0075

Publisher

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Emerald Publishing Limited

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