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Financing high-tech SMEs in China: A three-stage model of business development

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  • Li Xiao

Abstract

This article examines the financing of high-tech Small and Medium-sized Enterprises (SMEs) in China at different stages of business development, based on a survey of 74 face-to-face interviews with high-tech SMEs and additional nine informal face-to-face interviews with bank and government officials in the two Chinese provinces of Guangdong and Guangxi. Attention is focused on distinguishing different financing methods according to particular stages of an SME's business life cycle. The findings show the importance of informal financial sources from individuals and firms’ employees for high-tech SMEs at all three development stages. Such sources have become a central aspect of the financial infrastructure for the private sector in China. The article distinguishes between the alternative methods or practices used by firms at all three stages, seeking to either overcome particular financial constraints or to avoid the commitment of large capital investments in relatively long-term projects. It identifies the absence of demands and a gap for medium- and long-term funding for high-tech SMEs, placing a serious barrier on the ability of high-tech SMEs to engage in R&D for making more fundamental innovation and developing new/distinctive products. It concludes by making the implications of these findings for China, and internationally.

Suggested Citation

  • Li Xiao, 2011. "Financing high-tech SMEs in China: A three-stage model of business development," Entrepreneurship & Regional Development, Taylor & Francis Journals, vol. 23(3-4), pages 217-234, April.
  • Handle: RePEc:taf:entreg:v:23:y:2011:i:3-4:p:217-234
    DOI: 10.1080/08985620903233937
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    Cited by:

    1. Esho, Ebes & Verhoef, Grietjie, 2018. "The Funding Gap and the Financing of Small and Medium Businesses: An Integrated Literature Review and an Agenda," MPRA Paper 90153, University Library of Munich, Germany, revised 21 Nov 2018.
    2. Kui-Wai Li, 2018. "Analyzing The Tfp Performance Of Chinese Industrial Enterprises," The Singapore Economic Review (SER), World Scientific Publishing Co. Pte. Ltd., vol. 63(05), pages 1263-1284, December.
    3. Su, Zhong-qin & Xiao, Zuoping & Yu, Lin, 2019. "Do political connections enhance or impede corporate innovation?," International Review of Economics & Finance, Elsevier, vol. 63(C), pages 94-110.
    4. Anders Lundström & Peter Vikström & Matthias Fink & Miguel Meuleman* & Paweł Głodek & David Storey & Andreas Kroksgård, 2014. "Measuring the Costs and Coverage of SME and Entrepreneurship Policy: A Pioneering Study," Entrepreneurship Theory and Practice, , vol. 38(4), pages 941-957, July.
    5. Julie Elston & Sandy Chen & Alois Weidinger, 2016. "The role of informal capital on new venture formation and growth in China," Small Business Economics, Springer, vol. 46(1), pages 79-91, January.
    6. Yu Lu, 2017. "Seeking Finance, Perceived Financial Constraints and R&D Engagement," Post-Print hal-02559421, HAL.
    7. Randhawa, Krithika & Wilden, Ralf & Gudergan, Siegfried, 2021. "How to innovate toward an ambidextrous business model? The role of dynamic capabilities and market orientation," Journal of Business Research, Elsevier, vol. 130(C), pages 618-634.
    8. Ratinho, Tiago & Amezcua, Alejandro & Honig, Benson & Zeng, Zhaocheng, 2020. "Supporting entrepreneurs: A systematic review of literature and an agenda for research," Technological Forecasting and Social Change, Elsevier, vol. 154(C).
    9. Julie Elston & Sandy Chen & Alois Weidinger, 2016. "The role of informal capital on new venture formation and growth in China," Small Business Economics, Springer, vol. 46(1), pages 79-91, January.

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