Extending credit to small and medium size companies : relationships and conflict management
Document Type
Journal article
Source Publication
International Journal of Conflict Management
Publication Date
2016
Volume
27
Issue
3
First Page
331
Last Page
352
Publisher
Emerald Group Publishing Limited
Keywords
Transaction costs, Conflict management, Customer orientation, Credit worthiness
Abstract
Purpose: Funding small and medium-sized enterprises (SMEs) may be especially valuable in China to stimulate innovation and its emerging market economy. These firms have been advised to build on the Chinese value of guanxi to manage conflicts and develop relationships with banks. This study aims to explore the nature of relationships that help SMEs inform banks and convince them to provide credit.
Design/methodology/approach: As this study’s theorizing is about whether banks and firms that manage their conflicts for mutual benefit set the foundation for bank’s confidence in extending credit, therefore, both the bank officers and the company managers were asked to provide information for the study. One hundred and six pairs of bank officers in the loan department of four banks and SME managers in Shanghai, China completed a questionnaire survey for this study.
Findings: Results support the argument that marketing research on customer orientation and organization behavior research on conflict management identify how to develop effective marketing relationships between SMEs and banks in China. Banks that were customer oriented laid the groundwork for managing conflict cooperatively and not competitively with borrowing firms. Cooperative conflict management in turn was found to convince banks that they could confidently provide credit and borrowers that their transaction costs will be reasonable.
Originality/value: This study identifies that developing guanxi and the capacity to manage conflict cooperatively are an important foundation for providing credit to SMEs in China.
DOI
10.1108/IJCMA-06-2015-0034
Print ISSN
10444068
E-ISSN
17588545
Publisher Statement
Copyright © Emerald Group Publishing Limited. Access to external full text or publisher's version may require subscription.
Full-text Version
Publisher’s Version
Language
English
Recommended Citation
Wong, A., Lu, W., Tjosvold, D., & Yang, J. (2016). Extending credit to small and medium size companies: Relationships and conflict management. International Journal of Conflict Management, 27(3), 331-352. doi: 10.1108/IJCMA-06-2015-0034