iBusiness, 2013, 5, 158-161
http://dx.doi.org/10.4236/ib.2013.53B034 Published Online September 2013 (http://www.scirp.org/journal/ib)
Study on the Efficiency of SMEs’ Bank Financing in
Ke Liu, Lan Wang
School of International Business, Beijing Language and Culture University, Beijing, China.
Received 2013
The critical factor in business strategic development process is financial resources. In this paper, we develop a model
that examines how small and family firms got financial resources from the bank and explore how different levels of
relationship affect the efficiency of bank financing. Based on literature review and field study, the research reveals that
the inter-person relationship and inter-firm relationship facilitate the reputation of firm and then promote the bank fi-
nancing performance. Further, practical suggestions are discuss for small and media firm in clusters.
Keywords: Bank Financing; Strategic Development Management; Clusters
1. Introduction
As the rapid development of industrial clusters in recent
years, the financing of SMEs in industrial clusters has
been given more concern. In the age of economic global-
ization, the industrial cluster, as an international form of
the industrial layout, integrate into global supply chains,
share the industrial division of economic globalization
and form competitive industry, further enhancing the
international competitiveness. Financing is a critical bot-
tleneck problem in the development of SMEs. SMEs’
business activities are more closely embedded in the
network because of its geographical location closeness[1],
promoting the exchange of information and the dissemi-
nation of knowledge.
2. Literature Review and Hypothesis
In the growth and expansion process, businesses often
encounter the financial constraints in order to maintain
and enhance the competitive advantage. Effective obtains
of external financing for SMEs are particularly difficult.
One crucial reason is that the market environment of
SMEs is dispersed, which lack adequate asset and the
scale capability is weak. Besides, they lack relevant in-
formation and knowledge of management and operation
so that banks and other financial institutions find difficult
to provide high quality financial services to SMEs[2].
Past researches of external financing problems of
SMEs are mainly based on asymmetric information and
agency theory. Some studies believe that the full under-
standing and disclosure of hard information (enterprise's
assets, liabilities, profitability ratio, etc.) and soft infor-
mation (the lending relationship with financial institu-
tions) can reduce information asymmetries and agency
costs[3], thereby enhancing the financing quality of en-
terprises; However, such theory does not fully reveal the
special character of clusters, so this paper will try to
analyze the financing process of industrial clusters from
the perspective of the management theory.
In order to test different types of relationship’s effect
on the efficiency of bank financing, two categories (in-
ter-person relationship and inter-firm relationship) were
defined as factors promoting the bank financing per-
formance and explore how the two kind of relationship
could be used to effectively influence bank financing.
First, we develop our theory and research hypotheses.
We discuss how inter-person relationship and inter-firm
relationship facilitate innovation performance. Next, we
describe our methods to test these hypotheses. Finally,
we present the results of the study and discuss their im-
2.1. Inter-person Relationship and Bank
Inter-person relationship plays a vital role in success of
SMEs in many scenarios [4]. Inter-person relationship
can be seen as a resources platform for managers, in-
cluding financial, information, advice and emotional
support and so forth. Inter-person relationship can help
companies to get support and resources in the clusters
like guarantee [5]. Specifically, the inter-person rela-
tionship promotes corporate image through friends and
relatives, thereby let the banks more easily got the in-
formation. Besides, banks could have deep understanding
Copyright © 2013 SciRes. IB
Study on the Efficiency of SMEs’ Bank Financing in Clusters 159
of the firm though inter-person relationships [6]. It shows
that a high level of inter-person relationship contributes
to businesses’ bank financing and played a role in the
financing process. Therefore, we assume that:
H1 The higher the level of inter-person relationship,
the higher the level of enterprise bank financing per-
2.2. Inter-firm Relationship and Bank Financing
High level of inter-firm relationships means that they do
not try to solve the problem in the process of damaging
each other's interests [7]. They do not care gain or loss in
the collaboration or have opportunistic behaviors. High
level of inter-firm relationship shows good performance
and partner history of the two sides and further improv-
ing the companies’ financial efficiency from banks [8].
Actually, mutual trusted businesses will pay extra efforts
to overcome difficulties and help each other to solve
problems because they understand the situation of each
other and have full information, so the good credit is
more likely to occur [9]. The more stable the long-term
oriented trade relationship between enterprises, the more
opportunities of external financing, the more possibilities
of enterprises’ getting financial resources from the bank.
Therefore, we assume that:
H2 The higher the level of inter-firm relationship, the
higher the level of enterprise bank financing perform-
3. Research Method
3.1. Sample and Data Collection
This paper uses statistical tool to analyze the model and
also based on through the literature review, expert con-
sultation and semi-open questionnaires, etc. Before
sending out the questionnaires, we will consult three ex-
perts about the description methods of questions and
contents, adjusting the questionnaire mainly from theo-
retical viewpoint and long-term management and con-
sulting experience. We elect several enterprises to do
further evaluation and interviews, consulting senior ex-
ecutives and in-depth interviews, and form the final
questionnaire used in this study.
On this basis, this research cooperates with Private
Enterprises Business Association in Wenzhou, Zhejiang
Province. We selected 700 companies randomly from the
Association's Business Directory, sent out700 question-
naires from early October 2007 to the end of 2008, and
collected 305 questionnaires back, reaching 43.5%.In the
returned questionnaires, there were 94 with incomplete
content or obvious errors and be removed as invalid
questionnaires. The 211 valid questionnaires were effec-
tive response, with a valid rate of 30.1%. In order to en-
sure that data does not exist non-response bias, we do
Chi-square analysis to early and late recovery question-
naire in the enterprise's employee number and sales
revenues. The result shows that the questionnaire in the
two groups has no significant difference, indicating that
the data was not significant non-response bias. Ta b le 1 is
the statistical analysis of sample firm business sales.
3.2. Measurement
This measurement uses the 5-point scale table. Accord-
ing to the actual situation and the degree of consistency
from "totally disagree" to "completely agree", respon-
dents give scores from 1 to 5. In order to avoid the prob-
lems, this study Harman single-factor test. The method is
to use all items in factor analysis, without rotation by
getting the first principal component, which reflects the
amount of CMV. In this article, all questionnaire items
(independent variables and dependent variables) are used
in factor analysis; five factors explained 56% of total
variance. We find that the first factor explained only 26%
of the variance, which indicates that no single factor
could interpret most of the variance; therefore, the ho-
mology error of the research is not severe.
In addition, this study uses internal consistency
method to test Cronbach's α reliability. The reliabilities
of all variables are, inter-firm relationship (α = 0.6), in-
terperson relationship (α = 0.5), bank financing effi-
ciency (α = 0.7). Therefore, the variables in this study
have good reliability.
Table 1. Distribution of respondents.
N %
Sales revenues (in million RMB)
Less than 1 3 1.5
1-5 6 3.1
5-10 12 6.2
10-30 38 19.6
30-100 83 42.8
Above 100 52 26.8
Total 211 100
Total 211 100
Table 2. Correlation matrix and summary statist.
Variables 1 2 3
1. Inter- person relationship 1
2. Inter-firm relationship 0.184* 1
3. Bank financing 0. 173* 0.228**1
Mean 3.798 3.207 2.946
S.D. .5570 .4831 .7885
p < 0.05; ∗∗p < 0.01; ∗∗∗p < 0.001 (two-tailed test)
Copyright © 2013 SciRes. IB
Study on the Efficiency of SMEs’ Bank Financing in Clusters
4. Test Results of the Model
In this paper, we use two multi-regression models to test
the proposed hypothesis.
Model 1 uses the bank financing efficiency as the de-
pendent variable. In test hypothesis 1, inter-person rela-
tionship has a positive significant effect on bank financ-
In regression model 1, to test H1 the higher the level
of inter-person relationship, the higher the level of enter-
prise bank financing performance. We put in control
variable, independent variables (inter-person relationship)
(β = 0.85, p <0.01); when put into the social relationship
variables, it increases significant level of the dependent
variable’s interpretation (ΔR2 = 0.034) in p <0.01. Thus,
the assumption 1 the higher the level of inter-person rela-
tionship, the higher the level of enterprise bank financing
performance is supported is supported. Then we put in
independent variables (inter-firm relationship) (β = 0.158,
p <0.05); when put into the social relationship variables,
it increases significant level of the dependent variable’s
interpretation (ΔR2 = 0.022) in p <0.05. Thus, the as-
sumption 2 the higher the level of inter-firm relationship,
the higher the level of enterprise bank financing per-
formance is supported.
Table 3. Results of regression analyses.
Model 1
The efficiency of bank
financing performance
Model 2
The efficiency of bank
financing performance
IV(main effect)
IV(main effect)
Industry -.104 -.100 -.104 -.095
business type -.063 -.059 -.063 -.080
firm size .013 .038 .013 .026
sale Revenues .106 .109 .106 .077
total asset .222* .205* .222 .196*
IP .185**
IF .158*
R2 .103 .137 .103 .126
Increase in R2 _ .034** _ .022*
F-value 4.579 5.237*** 4.579 4.741***
p <
p <
05; ∗∗
p <
01; ∗∗∗
p <
001 (two-tailed test)
5. Conclusion and Implication
The purpose of this research is to explore different types
of relationship – inter person and inter-firm relationship
impact on corporate bank financing, which has a great
significance for us to understand the path of SMEs’ fi-
nancing in industrial cluster. The result reveals that inter
person relationship brings benefits to businesses’ bank
financing and inter firm relationship also plays a vital
role in this process. i.e. the higher the level of inter-firm
relationship, the higher the level of corporate bank fi-
nancing performance.
The two issues explored in this research have a sig-
nificant reference meaning to management practices. The
value of relationship brought by inter-person and in-
ter-firm relationship is significant. Long-term inter-firm
relationship increases the opportunities of providing in-
formation. Managers should pay attention to enhance its
reputation level in the network by building relation-
6. Limitations of the Research
Although this study makes exploration in the field of the
financing theory and the strategy management, there are
still some shortcomings, First of all, because we only
examined two types of enterprise relationships, even
though these two elements are important, they cannot
represent all characteristics of the relationship. Further
research could consider integrating other variables into
the model. Secondly, the paper does not classify different
types external financing channels, thus future research
could explore the difference.
7 Acknowledgements
This paper is sponsored by Beijing Language and Culture
University “twelfth five-year plan” project(Project
Number:11GH05 ) Research on the internationalization
of RMB
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