Supply Chain Finance, Performance and Risk: How Do SMEs Adjust Their Buyer-Supplier Relationship for Competitiveness?

Journal of Competitiveness

18 Pages Posted: 18 Oct 2021 Last revised: 3 Jan 2022

See all articles by Feng Liu

Feng Liu

Shandong University

Mingjie Fang

Korea University

Kwangtae Park

Korea University

Xuesheng Chen

Shandong University

Date Written: October 15, 2021

Abstract

Supply chain finance (SCF) has attracted considerable attention being an innovative business model that allows firms, especially small- and medium-sized enterprises (SMEs), to convert illiquid assets into cash without incurring additional liabilities. However, its effects on SME performance and risk have been insufficiently studied. The competitiveness of SMEs depends on performance enhancement and risk mitigation. Thus, this study constructs a scaled-decile rank transformation of account receivable turnover to gauge the degree to which a supplier implements SCF, thereby examining the relationship between SCF, performance, and risk. We collect data on 4,679 SMEs from the Chinese manufacturing sector. Thereafter, hierarchical linear regression, a complex form of multiple linear regression analysis, is employed to test the hypotheses. The results indicate that an SME’s SCF adoption positively impacts its performance but negatively impacts its risk. To further explore cross-sectional variability, we investigated the buyer-supplier relationship’s moderating role. Results show that an increase in customer concentration strengthens both the positive effects of SCF on performance and the negative effects of SCF on risk. Overall, our study contributes to the literature on the interface of operations and finance in supply chains by exploring the multiple facets of SCF adoption and highlighting the moderating role of buyer-supplier relationship in SCF and SME competitiveness. Finally, we provide managerial implications for SMEs and financial service providers by validating the value of SCF implementation and the buyer-supplier relationship management in forging competitive advantages.

Keywords: Supply chain finance, Customer concentration, Supplier performance, Credit risk, SMEs

JEL Classification: M11, G21, G32

Suggested Citation

Liu, Feng and Fang, Mingjie and Park, Kwangtae and Chen, Xuesheng, Supply Chain Finance, Performance and Risk: How Do SMEs Adjust Their Buyer-Supplier Relationship for Competitiveness? (October 15, 2021). Journal of Competitiveness, Available at SSRN: https://ssrn.com/abstract=3942969

Feng Liu (Contact Author)

Shandong University ( email )

Businees School
Weihai
China

Mingjie Fang

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

Kwangtae Park

Korea University ( email )

1 Anam-dong 5 ka
Seoul, 136-701
Korea, Republic of (South Korea)

Xuesheng Chen

Shandong University

27 Shanda Nanlu
South Rd.
Jinan, Shandong 250100
China

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