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Book part
Publication date: 19 August 2017

Raphael Bar-El, Ilanit Gavious, Dan Kaufmann and Dafna Schwartz

The literature documents a shortage in the supply of external funding to small- and medium-sized enterprises (SMEs) in general and to innovative SMEs in particular. This…

Abstract

The literature documents a shortage in the supply of external funding to small- and medium-sized enterprises (SMEs) in general and to innovative SMEs in particular. This study separates cognitive from financial constraints on innovative SMEs’ growth opportunities. Using data gathered through in-depth interviews with the CEOs of 115 SMEs, we reveal that over and above a problem with supply, there exists a twofold problem on the demand side. Specifically, we document that there is a tendency for these companies to avoid approaching external funding sources, especially ones that gear their investments toward innovation. Our results reveal a cognitive bias (over-pessimism) affecting the entrepreneurs’ (lack of) demand for external financing over and above other firm-specific factors. CEO tenure — our proxy for human and social capital — is significantly lower (higher) in firms that did (did not) pursue external funding. This finding may provide some support for our hypothesis regarding the cognitive bias and over-pessimism of the more veteran CEOs who have had negative experiences regarding recruiting external resources. The impact of this entrepreneurial cognition is shown to be economically detrimental to the enterprise. Nevertheless, the negative effects are not limited to the micro level, but have implications at the macro level as well, due to under-realization of the potential for employment, productivity, and growth of the firms comprising the vast majority of the economy.

Details

Human Capital and Assets in the Networked World
Type: Book
ISBN: 978-1-78714-828-4

Keywords

Article
Publication date: 20 July 2021

Qiang Lu, Yang Deng, Miao Yu, Hua Song and Beini Liu

This paper examines how weak ties and strong ties in the supply chain network influence the financing performance of small and medium enterprises (SMEs) through the…

Abstract

Purpose

This paper examines how weak ties and strong ties in the supply chain network influence the financing performance of small and medium enterprises (SMEs) through the mediation of information sharing and innovation capability.

Design/methodology/approach

Questionnaires were administered to 208 financial managers responsible for supply chain finance in SMEs in China. Data analysis techniques used included multiple regression analysis and fuzzy-set qualitative comparative analysis.

Findings

The authors found that weak ties had a more substantial impact on the financing performance of SMEs than strong ties did. Information sharing and innovation capability played a mediating role between weak and strong ties and the financing performance of SMEs. In addition, information sharing and innovation capability complement each other and jointly influence the financing performance of SMEs.

Practical implications

SMEs are suggested to actively embed themselves in the supply chain network to increase financing opportunities and reduce financing costs. The authors also recommend SMEs to enhance the level of their information sharing in the supply chain network and take advantage of their network ties to access and adopt new technology from other organisations and conduct collaborative innovation with partner institutions.

Originality/value

The paper extends the authors’ understanding of supply chain finance by exploring the intrinsic mechanism of how various constructs (weak ties, strong ties, information sharing and innovation capability) in the supply chain network have an impact on the financing performance of SMEs. In particular, the authors explore the under-researched mediating effect of information sharing and innovation capability on the relationship between network ties and the financing performance of SMEs.

Article
Publication date: 22 October 2020

Sushma Verma, Samik Shome and Aakruti Patel

The study aims to empirically evaluate the effect of internal factors of small and medium enterprises (SMEs) on their financing choices. It also examines the financing

Abstract

Purpose

The study aims to empirically evaluate the effect of internal factors of small and medium enterprises (SMEs) on their financing choices. It also examines the financing practices of listed SMEs in India and finds out whether the financing patterns of listed SMEs follow the established theories of corporate finance.

Design/methodology/approach

For this study, 113 SMEs listed on National Stock Exchange Emerge Platform are considered for the period from 2014 to 2018. Panel data regression is applied. The control group has been identified by using the propensity score matching approach. Qualitative information has been collected from the bank officials and the promoters of listed SMEs.

Findings

The study reveals that for meeting financial requirements, listed SMEs initially create current liabilities followed by usage of total reserves. Thereafter, they look for short- and long-term borrowings for further funding options. No significant change is observed in the financing pattern of listed SMEs as compared to their non-listed matched firms. The study suggests that no single theory, including pecking order theory or trade-off theory, could explain the behaviour of SMEs financing completely.

Research limitations/implications

The financing pattern of SMEs can be of great interest to various stakeholders such as government and lenders. As no significant boost is observed in debt financing post listing, this aspect needs to be evaluated by the stakeholders.

Originality/value

This study is significantly different from the existing studies, as it attempts to evaluate the impact of listing on overall financing pattern of SMEs in India. This is also one of the very few studies that uses both quantitative and qualitative information to examine the same.

Details

Journal of Entrepreneurship in Emerging Economies, vol. 13 no. 5
Type: Research Article
ISSN: 2053-4604

Keywords

Article
Publication date: 4 June 2019

Yasmeen Al Balushi, Stuart Locke and Zakaria Boulanouar

This paper aims to investigate small and medium enterprises’ (SMEs) owner–managers’ awareness, willingness and perceptions concerning Islamic financing instruments as an…

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Abstract

Purpose

This paper aims to investigate small and medium enterprises’ (SMEs) owner–managers’ awareness, willingness and perceptions concerning Islamic financing instruments as an alternative sourcing decision in SMEs’ businesses.

Design/methodology/approach

The research employed mixed methods to gather data. A questionnaire survey was conducted via face-to-face interviews with 385 SME owner–managers operating in Muscat, Oman’s capital city, along with face-to-face discussion on Islamic finance with 86 SME owner–managers. Descriptive and thematic analysis were used to analyse the data.

Findings

The findings indicate that SME owner–managers are aware of Islamic banking principles and have knowledge of Islamic financial instruments, despite Islamic finance being new to Oman. Interestingly, although the majority of the participants indicated their intention to adopt this new finance method, they were motivated by special requirements other than finance. Their positive perception of Islamic financing methods could play a significant role in developing the Islamic banking industry.

Research limitations/implications

The research is limited in that its data came only from Omani SME owner–managers in Muscat. Future research could investigate wider samples. Secondly, the study’s findings lack generalisability to larger and public enterprises, because only SME owner–managers were surveyed.

Practical implications

This study will be important for policy makers concerned about SMEsfinancing, Islamic financial institutions and new entrants into the Islamic banking industry, as it provides empirically evidence of Omanis’ views, and more specifically those of Omani SME owner–managers, on the recent introduction of Islamic finance into the country. The insights this study offers should help them to develop the strategies required to attract SMEs and to construct policies and regulations to improve Oman’s Islamic banking industry.

Originality/value

The research is significant, as it is the first study to investigate the awareness, willingness and perceptions of Omani SMEs regarding Islamic banking in Oman. Even though all Omanis are Muslims, Oman was the last of the six-nation Gulf Cooperation Council countries to introduce Islamic finance. Thus, this emerging market provides an important basis from which to extend future research on Islamic finance to other potential Islamic finance markets.

Details

Qualitative Research in Financial Markets, vol. 11 no. 4
Type: Research Article
ISSN: 1755-4179

Keywords

Article
Publication date: 13 April 2015

Masato Abe, Michael Troilo and Orgil Batsaikhan

The purpose of this paper is to propose policy suggestions for the financing of small and medium enterprises (SMEs) in the Asia-Pacific region. Recent literature suggests…

5045

Abstract

Purpose

The purpose of this paper is to propose policy suggestions for the financing of small and medium enterprises (SMEs) in the Asia-Pacific region. Recent literature suggests that lack of capital is the most severe constraint for SME survival and growth. Enabling policymakers to assist SMEs in their search for financing will boost economic growth.

Design/methodology/approach

The methodology includes both quantitative and qualitative components. Current World Bank data on the strength of various financial institutions in the countries of interest is analyzed to discover areas of improvement. Additionally, 32 experts from East and South Asia were interviewed several times to determine areas of concern in financing SMEs. Their responses and the evidence from the World Bank data form the basis of the policy prescriptions in the paper.

Findings

Financing is a critical constraint for SMEs for several reasons. Many SME owners do not manage working capital effectively, information asymmetry between banks and SMEs retards the loan application and approval process, and underdeveloped equity markets deny SMEs future growth opportunities. Policymakers can ameliorate conditions by serving as facilitators and communicators; governments should not provide financing directly if possible.

Practical implications

It is hoped and expected that the policy prescriptions offered herein will enhance the growth and survival prospects of SMES, thereby creating more employment, innovation, and economic growth.

Originality/value

The main contribution of this work is its scope. While the financing of SMEs is a familiar topic, the review of issues and policies in East and South Asia, and their distillation into practical advice for officialdom, is what makes this manuscript unique.

Details

Journal of Entrepreneurship and Public Policy, vol. 4 no. 1
Type: Research Article
ISSN: 2045-2101

Keywords

Article
Publication date: 26 September 2022

Xiongying Wang and Xiang Chen

This paper mainly explores the relationship between digital inclusive finance and financing constraints of technological-based SMEs, and how digital inclusive finance

Abstract

Purpose

This paper mainly explores the relationship between digital inclusive finance and financing constraints of technological-based SMEs, and how digital inclusive finance affects the financing constraints of technology-based SMEs. This paper empirically analyzes the relationship between them through the OLS model, and then further verifies the relationship between them through robust regression and heterogeneity analysis. At the same time, it uses the mechanism test to explore how digital inclusive finance affects the financing constraints of technology-based SMEs. This paper aims to address these issues.

Design/methodology/approach

This paper aims to explain the relationship between digital inclusive finance and financing constraints of technological-based SMEs. Technology-based SMEs always face the difficult problem of “financing difficulty” and “financing expensive” in the development process, which hinders the survival and development of enterprises to some extent. Digital inclusive finance development policy vigorously promoted by the state has alleviated the financing constraints of technology-based SMEs and brought opportunities for their development.

Findings

The results show that the role of digital inclusive finance in alleviating the financing constraints of technology-based SMEs, and incremental supplement and alleviating information asymmetry are the main reasons for digital inclusive finance to alleviate the financing constraints of technology-based SMEs. In view of the availability of digital inclusive financial data, this paper only uses the data from 2014 to 2019.

Originality/value

The authors’ research clearly found that the development of digital inclusive finance alleviates the financing of technology-based SMEs from the two aspects of “incremental supplement” and alleviating information asymmetry, so as to provide corresponding reference basis for the government to formulate a series of plans to support the development of technology-based SMEs.

Details

Kybernetes, vol. ahead-of-print no. ahead-of-print
Type: Research Article
ISSN: 0368-492X

Keywords

Article
Publication date: 24 August 2021

Nazik Fadil and Josée St-Pierre

The purpose of this paper is to identify business practices that may promote internal financing of growing SMEs. The authors expand the literature on entrepreneurial…

Abstract

Purpose

The purpose of this paper is to identify business practices that may promote internal financing of growing SMEs. The authors expand the literature on entrepreneurial finance that reduces business practices to either financial management or bootstrapping, by exploring all management practices that may have an impact on liquidities. This study enriches the literature on business practices. This is an important consideration for managers of SMEs who intend to preserve their financial independence and their capacity to survive different crises.

Design/methodology/approach

The empirical study involved a sample of 235 growing Canadian SMEs. The sample was extracted from a private database using a questionnaire that covered a wide range of business practices. Variance testing of business practices between SMEs with a line of credit and those without (and lower overall debt) was supplemented by a logistic regression.

Findings

SMEs which make use of efficiency-promoting technology, carry out preventive maintenance and control their costs and turnover during their growth are more inclined to use less external financing.

Originality/value

This is the first study that associates business practices, beyond bootstrapping, with financing and which answers a critical question posed by SME executives on how to preserve their financial and decision-making autonomy through growth stages. In addition, the desire to retain control of the company does not compel the SME manager to limit the size of the company.

Details

Journal of Small Business and Enterprise Development, vol. 28 no. 7
Type: Research Article
ISSN: 1462-6004

Keywords

Article
Publication date: 21 February 2020

Qiang Lu, Beini Liu and Hua Song

This paper aims to explore how innovation capability and market response capability of small and medium-size enterprises (SMEs) affect their supply chain financing

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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 financing solutions (SCFS) adoption. At the same time, the mechanism by 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 significantly positive 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.

Details

Industrial Management & Data Systems, vol. 120 no. 4
Type: Research Article
ISSN: 0263-5577

Keywords

Article
Publication date: 12 October 2015

Jarunee Wonglimpiyarat

Today, the financing mechanisms to support small-and medium-sized enterprises (SMEs) development have been a subject of great interest and a challenge to policy makers as…

4592

Abstract

Purpose

Today, the financing mechanisms to support small-and medium-sized enterprises (SMEs) development have been a subject of great interest and a challenge to policy makers as SMEs are regarded as an important sector contributing to economic growth and stability. This paper is concerned with the bank financing policies to support SME development in China. The purpose of this paper is to examine the governmental financing policies and the innovation financing system of China. The discussions are focused on the bank financing policies to support SME development in China.

Design/methodology/approach

This study is a qualitative research with the use of case study methodology (Eisenhardt, 1989; Yin, 2003). The research is focused on the policy perspectives of bank financing to support SME development in the case of China, the world’s fastest-growing economy. To explore the role of financial institutions and banks in SME financing in China, the research also derives evidence from a collection of documentary investigation. The research fieldwork and interviews were undertaken in Beijing and Shanghai, major financial centers in China, with the use of semi-structured questionnaire. The analyses are undertaken to answer the key questions of: What are the Chinese government’s strategies to support the development of SMEs? To what extent the government policies in bank financing can support SMEs and promote the development of an innovative economy?

Findings

The empirical study has shown that despite the introduction of the 12th Five-Year National Economic and Social Development Plan to support SMEs development, China still needs to improve regulatory policies in support of innovative businesses which would help its transition to an innovation-driven economy. The study provides lessons and policy guidelines to improve the competitiveness of SMEs in China. The insights from this study can also be applied to other developing and emerging economies attempting to understand the role of financing mechanisms in building an innovative economy.

Originality/value

The study has addressed the policy challenges to support SME development in China, a major Asian emerging country and one of the fastest-growing economies in the world (with averaged growth rate of 10 percent per annum). The empirical study of policy challenges was undertaken in Beijing and Shanghai, major financial centers in China. The study offers insights which can be applied to other developing and emerging economies attempting to understand the role of SME financing policies and mechanisms in building an innovative economy.

Details

World Journal of Entrepreneurship, Management and Sustainable Development, vol. 11 no. 4
Type: Research Article
ISSN: 2042-5961

Keywords

Article
Publication date: 30 August 2018

Shaista Wasiuzzaman and Nabila Nurdin

The purpose of this paper is to examine the various factors that influence a small and medium enterprise’s (SME) decision to apply for bank loans.

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Abstract

Purpose

The purpose of this paper is to examine the various factors that influence a small and medium enterprise’s (SME) decision to apply for bank loans.

Design/methodology/approach

Data from survey responses of 145 SMEs from Selangor and the Federal Territory of Kuala Lumpur are used for this purpose. Exploratory factor analysis, logistic regression and SEM-PLS are used to analyze the data.

Findings

The findings from the survey show that an SME’s financial performance, its access to finance and its legal form play a significant positive role in its decision to apply for debt financing. Private limited SMEs that perform well and are able to access to various financing options are more likely to apply for financing. However, there is also evidence of a significant negative influence of credit history on the decision to apply for financing, as SMEs with a poor credit history are more likely to apply for financing. The age of an SME has weak influence while its size is found to be insignificant in influencing its decision to apply for financing.

Originality/value

The results imply the role of financial market imperfections such as adverse selection and information asymmetry in defining the SME’s demand for debt financing. The study contributes to a deeper understanding of the debt financing decisions of SMEs.

Details

International Journal of Bank Marketing, vol. 37 no. 1
Type: Research Article
ISSN: 0265-2323

Keywords

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