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Can Trade Credit Maintain Sustainable R&D Investment of SMEs?—Evidence from China

Author

Listed:
  • Langzi Chen

    (School of Management, Nanjing Forest Police College, No. 28, Wenlan Road, Qixia District, Nanjing 210046, China)

  • Zhihong Chen

    (Institute for International Students, Nanjing University, No. 22, Hankou Road, Nanjing 210093, China)

  • Jian Li

    (School of Business, Nan Jing Normal University, No. 1, Wenyuan Road, Qixia District, Nanjing 210023, China)

Abstract

Due to the long-term nature and information asymmetry, SMEs (Small and Medium Enterprises) experience serious financial constraints that affect their R&D investments. This article examines the effect of trade credit maintaining sustainable R&D investment of SMEs under financial constraints. Using the panel data of Chinese SMEs from 2002–2014, it was found that although the R&D investments of SMEs are restricted by financial constraints, trade credit can maintain the sustainability of enterprises’ R&D investment. Private enterprises are more reliant on trade credit, which can be intensified during periods of monetary tightening. Considering the counterfactual framework and the endogenous problems, the empirical results were also robust when using propensity score matching. To summarize, this article develops a new explanation for maintaining sustainable R&D investment of SMEs under financial constraints in developing countries.

Suggested Citation

  • Langzi Chen & Zhihong Chen & Jian Li, 2019. "Can Trade Credit Maintain Sustainable R&D Investment of SMEs?—Evidence from China," Sustainability, MDPI, vol. 11(3), pages 1-16, February.
    • Handle: RePEc:gam:jsusta:v:11:y:2019:i:3:p:843-:d:203878
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