Does supply chain finance improve SMEs performance? The moderating role of trade digitization

• Published in: Business process management journal Vol. 26; no. 1; pp. 150 - 167
• Main Authors: Ali, Zulqurnain, Gongbing, Bi, Mehreen, Aqsa
• Format: Journal Article
• Language: English
• Published: Bradford Emerald Publishing Limited 16-01-2020; Emerald Group Publishing Limited
• Subjects: Capital costs; Cash flow; Competition; Digitization; Executives; Factor analysis; Finance; Financial institutions; Financing; Globalization; Literature reviews; Loans; Regression models; Small & medium sized enterprises-SME; Small business; Supply chains; Visibility; Working capital; Supply chain finance; Trade digitization; Small- and medium-sized enterprises; Small and medium enterprises performance
• ISSN: 1463-7154; 1758-4116
• DOI: 10.1108/BPMJ-05-2018-0133

Purpose
A growing need for financing in small and medium enterprises (SMEs) has become a significant obstacle to the development of firms. To remove this barrier, the purpose of this paper is to examine how supply chain finance (SCF) assists the firms to improve their performance by utilizing the resource-based view (RBV). Furthermore, the present study also pursues to test the effect of trade digitization as a moderating variable in the relationship between SC finance and the firm performance.
Design/methodology/approach
Using data from the textile sector, the authors run confirmatory factor analysis in AMOS 24 and hierarchical linear regression model in SPSS 23 to measure the proposed model and hypotheses, respectively.
Findings
The study suggests that SCF significantly improves the SMEs performance. Moreover, trade digitization strengthens the relationship between SCF and SMEs performance. Thus, the current study significantly describes the firm RBV through SCF and trade digitization to predict the SMEs performance.
Practical implications
SMEs entrepreneurs or executives can optimize the working capital through SCF and enhance the visibility of transactions through digitization for improving SMEs performance. Moreover, SCF protects the SMEs due to its nature of risk mitigation strategy.
Originality/value
This study covered the unexplored gap in the previous literature of supply chain management by establishing the relationship between SCF and the firm performance empirically while identifying the role of trade digitization as moderating variable in the context of textile SMEs by employing RBV theory.