Social Capital And Financing In Small And Medium Enterprises

In new economy era, transaction cost in medium and small enterprises has sharply decreased. The rich labor resource in China brings the advantage in medium and small enterprises with the feature of labor-intensive. SMEs plays an important role in creating output value, modifying industrial structure, increasing job opportunities and servicing people’s life, as well as promoting economic development and maintaining social stability. However,all SMEs face the problems of hard financing and low financing efficiency which gradually become the “bottle neck” in their development. In addition, SMEs will be restricted by the new economic situation, international financial market fluctuates, RMB appreciates,CPI and PPI keeps at a high level and labor cost soars, all these threaten the advantage of cost existed in SMEs. Therefore, study of financing problems in SMEs is an urgent thing. Social capital is social relation, trust, credibility and social network. China is now in an special transition period with incomplete system, social capital, as an informal system, can enhance the credibility of enterprises efficiently and alleviate the block from the updated system, it is an institutional mechanism under the circumstance of incomplete Chinese system and weak law protection, as well as a motivation to promote Chinese economic development. Now the documents which mainly devote to the field of enterprises institutional environment, social capital and financing in SMEs are rare,its pace cannot catch up with the development of enterprises. Based on this background, this thesis is devoted to studying the institutional environment,social capital and financing in SMEs.This thesis mainly studies social capital’s influence upon SMEs, adopting the methods of survey and questionnaire to collect the basic information, the situation of social capital and financing behavior in SMEs in Henan province. Specifically, social capital is measured from three dimensions: structure dimension, relation dimension and cognitive dimension; enterprises financing information is represented by two indexes: ease of financing and financial flexibility of financing structure. The study results indicate that the relation dimension and cognitive dimension of social capital have an obviously positive correlation with the ease of financing in enterprises; the relation dimension of social capital and the ease of financing have an obviously positive correlation with the financial flexibility of financing structure; the structure dimension of social capital has no obvious relation with the ease of financing and the financial flexibility of financing structure. This thesis takes the medium and small enterprises from Shenzhen GEM listing as study object, studies empirically the social capital’s influence upon the financing in SMEs under the different institutional levers.The study results indicates: in the areas with incomplete institutional environment, the social capital is more facilitated with the financing convenience in SMEs; in the areas with poor institutional environment, social capital has a small financial flexibility upon the financing in SMEs.