Interfirm Networks and the Financing of Newly Established Enterprises

This paper examines how trade relationships affect the financing of newly established enterprises, focusing on both credit supply by financial institutions and credit demand by enterprises. While prior research has primarily emphasized entrepreneurs’ human capital and firm attributes, they have paid limited attention to the role of interfirm relationships. Using firm-level data, this paper analyzes whether the characteristics of trading partners and inter-organizational ties influence borrowing and lending behavior.

The results show that securing high-performing trading partners is unlikely to increase the probability of obtaining bank loans, but tends to reduce the loan amounts received among enterprises that obtain loans. Additionally, sharing the same main bank with a trading partner actually reduces the likelihood of borrowing, although this negative association is mitigated when the return on assets of the enterprise is high. Furthermore, when the CEO shares the same university affiliation as the trading partner’s CEO, the probability of borrowing decreases, whereas sharing the same prefecture of origin is associated with larger loan amounts.

These findings suggest that trade relationships function not only as informational signals to financial institutions but also as alternative channels of financial adjustment, thereby shaping both credit supply and demand for newly established enterprises.