International Journal of Production Economics xxx (xxxx) xxxx

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International Journal of Production Economics

journal homepage: www.elsevier.com/locate/ijpe

How do supply chain network and SMEs’ operational capabilities enhance

working capital financing? An integrative signaling view
Hua Songa, Xuan Yangb, Kangkang Yuc,∗
a
School of Business Renmin University of China Beijing, 100872, China
b
Small Business Banking Department Bank of Nanjing, Nanjing, Jiangsu, 210008, China
c
School of Agricultural Economics and Rural Development Renmin University of China Beijing, 100872, China

ARTICLE INFO ABSTRACT

Keywords: The problem of SME financing has always been a hot topic in both practical and academic fields. SMEs' financing
Supply chain finance difficulties stem from information asymmetry between lenders and borrowers. Nevertheless, a new development
SMEs' operational capabilities trend in business is that traditional lending appears to be giving way to supply chain finance, which greatly
Network embeddedness reduces information asymmetry and increases the possibility for SMEs to raise working capital. Drawing upon an
Integrative signaling view
integrative signaling view, this study identifies key factors that enable the information symmetry between SMEs
and financial service providers (FSPs) and increase their financing performance in a business-to-business context
by using multiple case studies based on qualitative data and social network (UCINET) analysis. It is found that
SMEs with specific operational capabilities and the necessary level of network embeddedness will overcome the
difficulty of information asymmetry by initially showing uncontrolled signals to FSPs in order to make them-
selves stand out from other unqualified firms. Moreover, FSPs will compensate for SMEs' deficiencies in both
structural and relational embeddedness. The interaction of both SMEs’ operational capabilities and network
embeddedness will jointly improve the availability of SME working capital.

1. Introduction
In the marketplace, small and medium-sized enterprises (SMEs)
usually face the problem of a shortage of working capital (Lee et al.,
2015; Psillaki and Eleftheriou, 2015). Even if SMEs have potentially
profitable investment opportunities, they may have insufficient funds to
exploit them; this has been labeled a “finance gap” (Cosh et al., 2009;
Mina et al., 2013). When the costs of survival or growth strategies in
these firms exceed the availability of financial resources owned and
controlled by owners/managers, obtaining capital from their families,
friends, or acquaintances may not meet the requirements; instead, they
are more dependent on the availability of external sources of finance
(Hussain et al., 2006), including banks, financial institutions, or venture
capitalists (Scarpi and Visentin, 2015; H. Song and Wang, 2013; H.
Song, Yu and Lu, 2018; St-Pierre et al., 2018). Internal funds will be the
favorite source of capital at the early stage of operations whereas access
to external finance becomes crucial with growth (Vos et al., 2007).
Nevertheless, opaqueness in terms of information about a SME's situa-
tion has a profound impact on lenders' financing decisions, particularly
if they feel they cannot reliably assess the SME's quality on the basis of
the perceived value of their operational activities (Carpenter and
Petersen, 2002; Casey & O'Toole, 2014; Stiglitz and Weiss, 1981).
Signaling theory has expanded to a wide range of research contexts
in management assumes that there is asymmetric information in the
market (see review by Connelly et al., 2011). Stiglitz (2000) suggests
that two kinds of information asymmetry are important: one is about
information quality and the other is about intention. For example,
lenders do not know the operational conditions of borrows as well as
their intentions of using the capital. To reduce information asymmetry,
it is necessary to facilitate information delivery. Kirman and Rao (2000)
propose the basic model of signaling theory and distinguish high and
low quality enterprises. If they effectively deliver signals, they would
get more profits. These signals also influence the opinion of external
observers such as lenders or investors. Therefore, sending and receiving
signals become the key approach to reduce information asymmetry. In
capital markets, information asymmetry between the borrower as the
signaler and the lender as the receiver is the main obstacle constraining
SMEs in obtaining loans or funding. Information disclosure between
SMEs and institutional lenders would reduce the cost of searching for
information and realizing transactions.
However, traditional signaling theory faces with many challenges
when financing SMEs and traditional signaling models such as securing a

*
Corresponding author.
E-mail address: yukangkang@ruc.edu.cn (K. Yu).

https://doi.org/10.1016/j.ijpe.2019.07.020
Received 30 July 2018; Received in revised form 3 July 2019; Accepted 20 July 2019
0925-5273/ © 2019 Elsevier B.V. All rights reserved.

Please cite this article as: Hua Song, Xuan Yang and Kangkang Yu, International Journal of Production Economics,
https://doi.org/10.1016/j.ijpe.2019.07.020
H. Song, et al.
mortgage, obtaining a credit guarantee or collateral, presenting fi-
nancial statements and so on are not quite effective (Z. Song and Zhang,
2018). From the perspective of signalers, the first challenge is that the
insufficient and scattered collateralizable assets of SMEs make lenders'
search for information to effectively evaluate credit too difficult
(Serrasqueiro, 2011). Under this condition, financing institutes who
rely on objective signals would neglect the outstanding SMEs who
adopt rhetorical signals such as issuing a press, launching a new pro-
duct or hiring a famous manager (Steigenberger and Wihelm, 2018).
The second challenge is that it is difficult to match the intention of
signalers and the need of receivers. To achieve the consistency, it is
necessary to present the integrative signals from all the participants
rather than the intentional signals from only one side (Connelly et al.,
2011). This kind of signals may be partially controlled or totally un-
controlled by signalers such as supply chain network (Podolny, 1993;
Pollock and Gulati, 2007; Plummer et al., 2016; Wu et al., 2017;
Posthuma et al., 2018), which could avoid the instability of traditional
signals. However, it's difficult for financing institutes outside the supply
chains to obtain these signals.
Faced with such challenges, supply chain finance (SCF) enables
SMEs to effectively access liquidity through effective signaling. SCF is
the inter-company optimization of financing as well as the integration
of financing processes with customers, suppliers, and financial service
providers (FSPs, which promote cash flow services in the supply chain)
in order to increase the value of all participating companies and facil-
itate the management of the transaction, physical, and information
flows within a supply chain (Hofmann, 2005; Pfohl and Gomm, 2009;
Camerinelli, 2009; Lamoureux and Evans, 2011; Caniato et al., 2016).
Compared with traditional signaling models, supply chain finance as an
integrative signaling model emphasizes the importance of operational
information integrated and transmitted through active embedding in
the supply chain (Prajogo and Olhager, 2012; H. Song et al., 2018),
which promotes the financing of SMEs by reducing information asym-
metry between FSPs and SMEs (Albertazzi et al., 2016; Lin and Lin,
2016). In this way, FSPs can get signals about their inner capabilities
and the situation embedded in the supply chain network.
The traditional lending is comprised of lenders and borrowers, but
SCF consists of a set of organizations that are interdependent and co-
ordinated, share some common adaptive challenges, and create mutual
value through the exchange of services (Ketchen et al., 2014; Lusch
et al., 2016). An example is offered by PrimeRevenue's effort to finance
small and medium-sized suppliers of Big Lots as a retail company. Big
Lots and all its SME suppliers joined a web-based service platform op-
erated by PrimeRevenue; here invoices received by Big Lots are uploaded
to the system after approval, and its SME suppliers can check the in-
voices via PrimeRevenue's system and have the option of selling the
approved invoices at a discount to banks. Then banks can access Pri-
meRevenue's system and make decisions about financing SMEs by de-
termining, acquiring, analyzing, synthesizing, and disseminating re-
levant SME business data. Thus, in comparison with the dyadic
relationship, collaboration in terms of networks enhances inter-
dependence and information-sharing between SMEs and a broader
array of stakeholders, including FSPs.
In this paper, we argue that supply chain networks provide the basis
for SCF from the perspective of an integrative signaling view and make
the following contributions. First, the traditional signaling model fo-
cuses on specific resources and basic capabilities which are used as
signals controlled by the company (Connelly et al., 2011). However, it
is not effective in the context of financing SMEs as they have in-
sufficient information representing their organizational capabilities.
Based on an integrative signaling view, we propose two kinds of new
signals: information about operational capabilities of SMEs, which is
partially controlled; and their position in the supply chain network,
which is totally uncontrolled. Second, another limitation of the tradi-
tional model is that it indicates that all information originates from
senders (Caldieraro et al., 2018). However, the integrative signaling is
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International Journal of Production Economics xxx (xxxx) xxxx
processed through interactions between all stakeholders (Basdeo et al.,
2006), which suggests that the fit between signals from different
sources are important. From a bilateral perspective, this study not only
analyzes SMEs network embeddedness but also investigates FSPs net-
work embeddedness. Third, in the field of SCF, the integration of fi-
nancial resources with logistics, transactions, and information flows has
been discussed and tested (Pfohl and Gomm, 2009; Sanders and
Wagner, 2011). However, most previous studies have been based on the
dyadic relationship between lenders and borrowers; few studies em-
phasize the importance of SMEs’ capability of incorporating networks,
which promotes integrative signaling. Grounded in the integration of
SMEs operational capabilities and their interactions with supply chain
networks, this study suggests a novel approach of reducing the level of
adverse selection of SMEs from a network perspective.
Using multiple case studies and network analysis, this study ex-
plores the network structure of SCF by answering the following research
questions:
RQ1. Which kind of SME operational capabilities can be used as
effective signals for SCF?
RQ2. What are attributes of supply chain networks comprised by SMEs
and FSPs?
RQ3. How do supply chain networks and operational capabilities
reduce information asymmetry and enhance availability of working
capital?
2. Literature review and theoretical framework
2.1. Information asymmetry and integrative signaling in SCF
Information asymmetry is a central issue in SME financing. If there
is sufficient information about SMEs in the market, SMEs can easily
obtain working capital from financial institutions. Nevertheless, reli-
able information is rare if ever possible, particularly in the context of
start ups, meaning high risks in the operation of SMEs (Berger and
Udell, 2006). Information asymmetry can easily lead to adverse selec-
tion, which jeopardizes SMEs’ financing; as Brealey et al. (1977) noted,
“where substantial information asymmetries exist and where the supply
of poor projects is large relative to the supply of good projects, venture
capital markets may fail to exist” (p. 371).
The presence of asymmetric information is a fundamental assump-
tion of signaling theory (Spence, 1974; Connelly et al., 2011). The most
important advantage of signaling theory is that it not only warns
players about the existence of asymmetric information in the market,
but also offers an alternative to solve the problem of adverse selection
caused by asymmetric information at lower costs (Connelly et al.,
2011). Without signals of competencies or transactional relationships
that SMEs often use as proxies for their quality, lenders have to make
decisions with limited information, causing high default rates. There-
fore, on the one hand, lenders need to decide how to collect and analyze
information to make inferences about the credit of SMEs and reduce
potential risks; on the other hand, SMEs should also share information
about themselves to increase the likelihood of getting capital at favor-
able interests rate.
In capital markets, signaling mainly includes securing a mortgage,
obtaining a credit guarantee or collateral, and presenting financial
statements and other means (Z. Song and Zhang, 2018). However, these
methods are often ineffective when financing SMEs. SMEs often do not
have adequate financial performance records or scales of collateral,
making them unable to meet the requirements of lenders. Even if they
have the corresponding information, signal fit defined as the extent to
which the signal is correlated with unobservable quality still remains a
problem because these signals are controlled and transmitted by SMEs
(Zhang and Wiersema, 2009; Connelly et al., 2011). Moreover, these
methods are mainly required by commercial banks for the purpose of
H. Song, et al.
identifying qualified borrowers, and these do not signal the firm-spe-
cific characteristics of SMEs. Therefore, in order to reduce information
asymmetry between lenders and SMEs, signals should be created, given
meaning, and objectively displayed as a function of continuously in-
teracting parties (Connelly et al., 2011).
SCF, as an effective means of solving financing problems for SMEs,
has the main characteristic of incorporating financing activities into the
context of supply chain management, which emphasizes the intersec-
tion of logistics, supply chain collaboration, and finance (Hofmann,
2005). Compared with traditional credit financing, SCF tends to pay
more attention to the collection of supply chain operational information
and the use of supply chain network as signals (H. Song et al., 2018).
Supply chain operational information reflects business processes or
exerts operational capabilities to offset the weakness of SMEs by un-
derstanding their inter-organizational business relations (Albertazzi
et al., 2016; Lin and Lin, 2016). This information is integrated and
transmitted through active embedding in the supply chain (Prajogo and
Olhager, 2012).
Traditional signaling model implies that all information originates
from senders (Caldieraro et al., 2018). However, this standpoint views
the signaling process from a broader communication perspective, sug-
gesting that signaling is processed through interactions between all
stakeholders and that the context within which signals are emitted and
received is likely to influence the quality of signals (Basdeo et al.,
2006). The organizational fields jointly operated by SMEs and their
counterparts transmit an important structural characteristic signaling
SMEs' market position. Furthermore, SMEs' market operations provide
information about their transactional relationship; underlying inner
capabilities in the market, these signals enable lenders to draw in-
ferences about SMEs and contribute shaping their credit. Unlike tradi-
tional signals such as mortgages, pledges, and financial statements that
are totally controlled by SMEs, the signals coming from supply chain
operation are only partially controlled by actors (Podolny, 1993). As
previous studies have demonstrated, “a number of characteristics over
which the focal actor has only partial control are frequently used as
signals” (Pollock and Gulati, 2007). These signals are provided by other
parties who make their own decisions, and thus are only partially under
the control of SMEs, although SMEs’ supply chain operational in-
formation may result from actions that they have initiated.
In addition to partially controlled signals, contextual or totally un-
controlled signals are also essential for evaluating SMEs' fundraising.
SMEs are somewhat “internal” participants and they possess more key
information than outsiders do; this information is usually more difficult
to discover and is closely related to the decision made (Spence, 1974).
Therefore, in order to achieve signal fit, the network or inter-organi-
zational relationship has become an important way to signal (Plummer
et al., 2016; Wu et al., 2017; Posthuma et al., 2018). For instance, some
researchers propose that a venture's prominent position in networks of
inter-organizational relationships can signal its quality and future
prospects because networks are expensive to form and maintain (Gulati
and Higgins, 2003). In the domain of SCF, financing activities are based
on the business relationship constructed by SMEs, their related coun-
terparts, and FSPs. From the standpoint of SMEs, the establishment of
better business relationships requires long-term and costly efforts, thus
naturally requiring signals from outsiders. By forming better network
with SMEs, FSPs can also realize the quality of SMEs through social
signaling (Posthuma et al., 2018), thereby reducing the possibility of
delinquency.
2.2. Conceptualization of SMEs operational capabilities in supply chain
From the perspective of RBV, competence is regarded as a com-
prehensive capability and the status of an enterprise to surpass its rivals
and maintain its position in the market competition in a specific way,
from either products, technologies, or processes (Prahalad, 2000). A
competent enterprise is able to maintain a competitive edge in the
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International Journal of Production Economics xxx (xxxx) xxxx
market, thus earning profits and enabling its consistent development
(Barney, 1991, 1995). Existing research about capabilities extends the
basic framework of enterprises' competencies. For example, when
considering their sources, firms’ capabilities can be divided into ex-
ternal and internal capabilities (Barney, 1991, 1995). They can also be
divided into organizational capabilities and operational capabilities in
consideration of processes that enable coordination/integration,
learning, and reconfiguration (Cepeda and Vera, 2007; Wu et al., 2010;
Helfat and Winter 2011).
As a partially controlled signal in SCF, SMEs operational capabilities
are crucial information for fundraising decisions. A firm's ability to
deploy resources and achieve specific goals (Amit and Schoemaker,
1993; Eisenhardt and Martin, 2000; H. Lee and Kelley, 2008; Winter
2000) is directly relevant to a firm's strategy and focuses on “how you
change your operational routine”. However, operational capabilities,
which focus on “how you earn your living”, are often overlooked be-
cause they are closely embedded in the organizational fabric of an
operating system (Helfat and Peteraf, 2003; Winter 2003). They are
regarded as “firm-specific sets of skills, processes, and routines, devel-
oped within the operations management system, that are regularly used
in solving its problems through configuring its operational resources”
(Wu et al., 2010). Operational capabilities show the extent of use of
resources and skills in SMEs' cooperation and coordination with part-
ners. This kind of information reflects SMEs' objective and observable
capabilities, which enables them to perform on an ongoing basis using
more or less the same skills on the same scale to support existing
markets. Therefore, these capabilities can be deployed as signals for
identifying the status of SMEs and reducing information asymmetry
during financing.
As for the taxonomy of operational capabilities, Wu et al. (2010)
proposed six capabilities relevant to firms’ operations: operational im-
provement, innovation, customization, cooperation, responsiveness,
and reconfiguration. Operational capabilities have also been identified
as a formative second-order construct with five formative di-
mensions—regulatory, positional, functional, cultural, and knowledge
value creation capabilities (Cepeda and Vera, 2007). However, these
classifications only reflect a portion of the operational capabilities of
SMEs in the context of SCF because the need and operating requirement
of SMEs are very different from those of large companies. In a study of
Huin et al. (2002) about the deployment of ERP systems, it was pro-
posed that SMEs are more sensitive to internal and external effects al-
though the system of SMEs is simpler in some respects as compared to
large companies. Similarly, because SMEs usually face more rivalry
from both their internal and external environments, it is believed that
contextual ambidexterity is crucial to producing performance and that
operational capabilities are about balancing trade-offs and come to be
ambidextrous (De Clercq, Thongpapanl and Dimov, 2014; Kortmann
et al., 2014).
In the context of SCF, only by demonstrating their contextual am-
bidexterity in both transactional and logistical processes, can SMEs
enable FSPs to implement SCF without fear of delinquency. SMEs
should fully utilize the resources and knowledge currently offered to
obtain and fulfill customer orders, which supports incremental refine-
ment. Moreover, this implies that SMEs have the flexibility to improve
or renew their capabilities to maintain close business relationships with
their partners, which supports continuous exploration. Therefore, we
posit that SMEs’ refinement and explorative capabilities signal their
operational capabilities in SCF.
2.3. SMEs supply chain network embeddedness
When other signals are lacking, the signaling value of a given net-
work is more pronounced to reduce adverse selection because for SMEs,
to participate and maintain prominent position in networks is costly
(Heuven and Groen, 2012; Ozmel et al., 2013). Therefore, the network
in which SMEs participate can better signal their position and
H. Song, et al.
competence in the marketplace. Moreover, in the process of SCF, FSPs
who provide financial services for SMEs through cooperating external
financial institutions or even their own financial institutions constitute
an important success factor. Thus, SMEs should proactively form and
maintain business networks in order to get effective signals (Silvestro
and Lustrato, 2014; Martin and Hofmann, 2017; H. Song et al., 2018).
The reason is that through ongoing interaction, FSPs can collect, pro-
cess, and disseminate an uninterrupted flow of information, thereby
enhancing their information superiority (Wu et al., 2017). In order to
exhibit SMEs' inherent characteristics and establish FSPs’ information
superiority, network embeddedness on both sides is necessary for pro-
moting SCF.
The proximity of enterprises in a supply chain and the repeated
exchanges between them foster communication, coordination, innova-
tion, interdependence, and trust (DeWitt et al., 2006; Zhao et al., 2008).
Previous studies have proposed structural and relational embeddedness
in order to calibrate the impact of networks on organizations' economic
activities (Gilsing and Duysters, 2008; Moran, 2005). Structural em-
beddedness describes the overall network structure and function, which
provides a wider scope of needed information and uses the measure-
ment of density, degree of center, and node to reflect actors’ positions
within the network. Relational embeddedness, however, is based on the
existing network structure and illustrates the basic characteristics of the
relationship between enterprises. It mainly uses measurements such as
relationship strength, durability, and frequency, which can reflect the
stability, reliability, and reciprocity of the relationship between en-
terprises (McEvily and Marcus, 2005; Wu et al., 2017).
From the SCF perspective, supply chain network structural em-
beddedness promotes the flow of funds and information and provides
SMEs with access to necessary resources and market opportunities, thus
ensuring the repayment of loans (H. Song, Yu, Ganguly and Turson,
2016). Moreover, FSPs can utilize their network position to form con-
trolling advantages over SMEs in order to avoid delinquency. Relational
embeddedness enables the communication and cooperation between
nodal firms, thereby enhancing the possibility for SMEs to access capital
(H. Song et al., 2016). It also provides restraint on SME default for fear
of losing support from other members, and maintains their reputation
in the network (Heuven and Groen, 2012). Therefore, network em-
beddedness plays an important role in SCF, mainly to enhance the
capabilities of SMEs or the information superiority of FSPs, offering
better opportunities for signal transmission.
2.4. Research framework
Compared with traditional signaling models, SCF as an integrative
signaling model promotes SMEs financing through providing such sig-
nals as SMEs’ operational capabilities and network embeddedness
under partial control of SMEs. Thus, this study will explore these re-
lationships as presented in Fig. 1.
First, the operational capabilities of SMEs are crucial factors that
can unintentionally signal SMEs’ competencies to FSPs, further influ-
encing the determination of financing activities. We will investigative
SMEs Operational Capabilities
Refinement Capabilities
SMEs Network FSPs Network
Explorative Capabilities
Embeddedness Embeddedness
Structural Structural
Embeddedness SMEs Fundraising Embeddedness
Relation Financing Volume Relation
Financing Duration Embeddedness
Embeddedness
Financing Interests
Fig. 1. Research framework.
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International Journal of Production Economics xxx (xxxx) xxxx
two kinds of SME operational capabilities used as effective signals for
SCF: one is refinement capabilities based on resources and knowledge
currently offered; and the other is explorative capabilities to maintain
close relationships by improving and renewing their capabilities.
Second, SMEs and FSPs are embedded in the same network with
common partners such as suppliers, customers, financial institutions,
and governments. As a result, the structure and relationship in this
network will influence working capital accessibility. We will investigate
the attributes of supply chain networks from both sides: SMEs and FSPs.
The two dimensions of network embeddeness: structural embeddedness
and relational embeddedness will be discussed.
Finally, measuring SMEs fundraising by financing volume, financing
duration and financing interests, we will explore the signaling me-
chanisms underlying the relationship between operational capabilities,
supply chain networks and SMEs fundrasing.
3. Methodology
The research question of how SMEs’ operational capabilities will
influence the SCF financing performance will be discussed in this study.
According to Creswell and Clark (2017), we opt for a multi-case study
combining both qualitative and quantitative data to generate valuable
insights. Besides the use of case study in theory building, it is also very
applicable to examining time-dependent relationships such as the ef-
fects of inter- and intra-organizational factors on performance (Wuttke
et al., 2013; Richard et al., 2015).
As there is no widely accepted design for conducting case studies
(Beverland and Lindgreen, 2010), we mainly follow the guide of Stuart
et al. (2002) and refer to other articles published in top-tier operation
management journals to ground our theoretical concepts.
3.1. Case selection
Unlike large-N statistical analysis, the process of the case study is
based on theoretical or purposeful sampling (Yin, 2017). What is re-
quired for the selection process is researcher familiarity with these case
firms beforehand. This means that case selection is somewhat inter-
twined with the data collection and data analysis processes (Seawright
and Gerring, 2008).
Scholars suggest that purposeful sampling for case studies should
pay attention to both representativeness and variation in terms of
theoretical interests (Seawright and Gerring, 2008). To guarantee the
representativeness, we selected cases according to three principles.
First, all the cases should be leading companies in their industry ac-
cording to the competitiveness and performance outcomes. Second, the
companies should have plentiful experiences in the field of SCF. It
means that they should have a large percentage of the market share and
maintain long-term relationships with their key customers. Third, to
achieve a balance between efficiency and effectiveness, we determine
our case firms based on the considerations of obtainability and richness
of data (Voss et al., 2002). With the guidance of research questions, the
top managers should be reluctant to share the information related to
their own companies as well as their customers.
To enhance variation, we select three cases that are rooted in three
different industries in China—agriculture, manufacturing, and inter-
national trade. According to China Statistical Year Book (National
Bureau of Statistics of China, 2018), the total output value of agri-
cultural industry is 6546.76 billion RMB, which represents 100% of
primary industry; the total output value of manufacturing is 27999.69
billion RMB, which represents 83.68% of secondary industry; and the
total output value of international trade is 27810.10 billion RMB, which
represents 65.26% of tertiary industry. Thus, the three industries se-
lected could represent the industry categories in China-primary in-
dustry, secondary industry and tertiary industry respectively.
Three focal supply chain firms have evolved into FSPs and have rich
experiences in this field. They have successfully constructed a
H. Song, et al. International Journal of Production Economics xxx (xxxx) xxxx

Table 1
Profiles of FSPs/SMEs and information of interviews.

Profiles of FSPs/SMEs Information of interviews

Name Customer Type of business Interviewees Duration Method

Firm A SME a Internet General Manager: 1; Chief Accountant: 1 3h Face-to-face
General Manager: 1; 2.5 h Face-to-face
General Manager: 1 0.5 h Telephone
SME a – Agriculture Production Manager: 2 2h Face-to-face
Firm S SME s Production CEO: 1; General Manager: 1 3h Face-to-face
CEO: 1 1.5 h Face-to-face
CEO: 1; General Manager: 1 1.5 h Face-to-face
CEO: 1; CRO of SCF: 1 2.5 h Face-to-face
CEO: 1 0.5 h Telephone
SME s – Design Managers: 2; Employees: 3 4h Face-to-face
Firm O SMEo Trade General Manager: 1 3h Face-to-face
General Manager: 1 2.5 h Face-to-face
CRO of SCF: 1 1h Face-to-face
SME o – Trade General Manager: 1 1.5 h Face-to-face

comprehensive supply chain network and provide working capital fi- been on its platform and financed by Firm O. Firm O has been the No.1
nance service for their business partners, which are mainly SMEs. When import and export BPO service platform in China by consolidating
conducting interviews with their managers, they are very willing to scattered service resources of different sorts for cross border trade and
share their ideas and experiences with us, which enables us to gather financing to provide professional services including customs clearance,
sufficient data and information. Table 1 gives a brief profile of these logistics and financing services to SMEs at lower cost while with more
three firms. efficiency. They were also credited as a demonstrative supply chain
Firm A is a world-famous Internet company founded in 1999 in enterprise in China.
Hangzhou, China. Its business includes e-commerce, logistics, financial
services, cloud computing, advertising, and cross-border trade. In 2014,
3.2. Data collection
Firm A launched an e-commerce project for the agricultural industry,
which helps rural consumers get online products and urban consumers
Despite the popularity of using qualitative data in case studies,
get agricultural products based on the e-commerce platform. At present,
quantitative data like demographics and scores from questionnaires are
they have implemented “the plan of thousands of counties and millions
also important and can be used to investigate problems with objective
of villages” with the objective of investing 10 billion RMB in three to
and intuitionistic examples (McCutcheon and Meredith, 1993). A dis-
five years and establishing 1000 operating centers at county level and
tinctive feature for conducting case studies is the possibility to combine
100000 service stations at village level. Relying on its mature payment
more than one approach to increase researchers’ deductive efforts or
system and network, Firm A started to provide inclusive financial ser-
provide an in-depth understanding of the phenomenon through “per-
vices for SMEs in the agricultural industry. These SMEs are located in
ceptual triangulation” (Bonoma, 1985). Our data collection process
rural areas of China and are mainly self-employed entrepreneurs en-
lasts for about three years, from October 2013 to March 2017. During
gaging in agricultural planting and cultivation.
this process, we conducted a total of 14 semi-structured interviews (11
Firm S is a high-tech company founded in 2007 and headquartered
with managers from three FSPs and 3 with managers from SMEs being
in Shenzhen, China. It began offering supply chain financial services in
provided SCF), supplemented with documentation and archival data
2011, including import and export customs services, document pro-
(such as business case analyses, process documentation, program de-
cessing, domestic/international procurement, domestic distribution,
scriptions) and the records of speeches given by managers from three
warehousing, logistics, and other supply chain solutions. Firm S
FSPs.
achieved strategic alliances with some international well-known soft-
Our semi-structured interviews are from two sources. One source is
ware vendors and based on the development of information technology
focal firm (FSP) managers, who make clear the whole process of
and focused on high-end professional supply chain services. Firm S is
working capital financing. The interviews of FSPs center around four
now the largest service platforms in the communication industry, and
key questions: (1) What is the specific scheme of SCF (taking a specific
its financial services are aimed at innovative SMEs, particularly man-
SME as an example)? (2) How are supply chain operations organized by
ufacturers. They have won many honors in this industry such as,
FSPs? (3) Which kinds of SMEs are the target of SCF? (4) How do FSPs
Shenzhen Customs “Client Coordinator Enterprise”, “Top 100 National
discriminate between “qualified” SMEs and others? After primary in-
General Trade Export Enterprise” named by Shenzhen Huanggang
terviews of FSPs, we utilized the technique of snowballing by asking
Customs for six consecutive years from 2008 to 2013, “Lenovo's
managers to recommend the SMEs which have been successfully pro-
Excellent Partner of Fiscal Year 2012” etc. In 2018, Firm S was credited
vided SCF services; this constitutes our second source of data. We re-
by Ministry of Commerce of China as one of the demonstrative en-
confirmed the data we gathered from FSPs by asking corresponding
terprises for their innovative supply chain management. Firm O is an e-
questions to SMEs in order to augment the quality of the data. To
commerce company founded in 2001 and headquartered in Shenzhen,
prevent misunderstanding and avoid missing information during in-
China. It used to provide one-stop supply chain management solutions
terviews, all were conducted by more than two investigators.
for SMEs' export business through its e-platform.
Firm O provides supply chain financial services for SMEs along with
procurement, container multimodal transport and distribution, logis- 3.3. Data processing and the quality of research
tics, and real-time pricing services. Over the past decades, they have
been a continuous force to drive the innovation of China's traditional Before data analysis and case discussion, we read, coded, and
model of cross border trade, via their practices to bring business process transcribed materials from multiple sources (Yin, 2017). First, we re-
operations online and hence to set up credit system for the enterprises ferred to a priori specification of constructs to pursue a more accurate
based on the data they gather. More than 150,000 SMEs in China have understanding of the raw materials and turn them into a comprehensive
coding structure (Eisenhardt, 1989; Voss et al., 2002). There are three

5
 H. Song, et al.

Table 2
Operational capabilities of three SMEs.

Dimensions Codes and original quotes SME a SME s SME o

Refinement capabilities [Market capacity] Medium High High

“Based on our stable cooperation history, the fruit company will sign a purchase agreement about purchasing Cuixiang (a leader in high-end kiwi fruit) with SME a. So, at the end of
October when the kiwi fruit matures, a fixed quantity will be procured by this company and sold online to customers all over this country.” (General Manager of Firm A)
“These emerging markets such as South America, Africa, India, and so on, import almost one billion mobile phones from China every year. Our mobile phone market has established
a relatively leading position overseas, and this company is in these markets. SME s has a very promising market overseas, especially in India. They came to me with the letter of credit
and asked for the service of SCF.” (CEO of Firm S)
“We all know that China does well in global trade. We can regard these SMEs as electricity plants that transport electricity to customers worldwide. SME o is just one powerful
electricity plant that is needed by them; it has steady voltage and always knows where the terminal is.” (General Manager of Firm O)
[Order fulfillment]
“The financing need is generated from their real operational process. For example, in order to fulfill the orders that it takes, SME a needs the money to buy fertilizers and upgrade
their equipment. Although we make the decision based on their fulfillment quality and logistics information, their utilization of the money into the right place ensures better
fulfillment next time and a quick payback afterwards.” (General Manager of Firm A)
“After obtaining orders, SME s will make samples and establish a line of credit. After receiving financing from us, they can fulfill the order in good quality. We conducted inspections
of them in the beginning, but now we don't need to do this because their order fulfillment is always on time and sometime exceeds our expectations.” (General Manager of Firm S)
“Actually, we have the basic requirement for SMEs to join our platform and enjoy our financial services. Their qualifications will be determined by the audit system. One of the
prerequisites is their ability to fulfill their orders and export overseas at the right time.” (General Manager of Firm O)

6
[Profitability]
“We are not financing blindly. You should know that when we pick the area, we have reliable information about the level of development of this area. Generally speaking, the firm
must have reached a level of profitability in the total area. Even if they have not thought about asking for loans before, once they come to us to borrow money, we can refer to our
original data and have a clear image about the firm's profitability. This means they have the ability to pay us back.” (General Manager of Firm A)
“I want to tell his story (the manager of SME s). He left his former company in 2009 and got his firm order worth 50,000 dollars. I watched him grow up step by step. Then he got a
shipment worth 2 billion yuan and 17 million in profit five years later. What is the profitability now? You can imagine that.” (General Manager of Firm S)
“You see that SME o had a small size two years ago, but the total amount of goods shipped from it reached more than seven million dollars in less than two years, and three times
more than before. This gave us confidence.” (General Manager of Firm O)
Exploration capabilities [Technology innovativeness] Low High Medium
“We know that financing will die without the support from the substantial economy. That's exactly what we pay more attention to. SME s has the ability to innovate, we know that. It
keeps pace with the world's first class companies by upgrading itself without a stop.” (General Manager of Firm S)
“We have an interesting finding. You thought they were traditional manufacturers and had an outdated management system. But they know how to take the advantage of the Internet
and renovate themselves. We provide SCF to SME o, which is actually a company that has transformed itself into an e-commerce company. It has joined the platform and evolves with
the platform.” (General Manager of Firm O)
[Entrepreneurship of the leader]
“To be honest, their persistence touches us. We all know that agriculture is largely influenced by weather and market turbulence. However, he has insisted on this planting for almost
two decades. When the environment is changing, the best way to survive is by believing in yourself and changing gradually, not drastically.” (General Manager of Firm A)
“There are many young entrepreneurs just like him (the manager of SME s), they are all called ‘Pioneers.’ I appreciate them. They have been trained in formal education and have
passion. They can lead us to go out and build links with industrial enterprises and research institutions.” (CEO of Firm S)
“You must admit that we Chinese people are more industrious and intelligent. He (the manager of SME o) is no exception. He works very hard to learn, even by imitating. Believe it or
not, if he saw a new product from another company yesterday, he could make a similar one today all by himself.” (General Manager of Firm O)
International Journal of Production Economics xxx (xxxx) xxxx
H. Song, et al.
levels in the coding structure. The first level is based on the theoretical
framework. The key constructs are operational capability of SMEs,
network configuration, structural embeddedness, relational embedd-
edness, and working capital finance performance. The second level is
composed of the dimensions of the first-level key constructs. For ex-
ample, operational capability includes refinement capability and ex-
ploration capability; network configuration includes network density
and centrality; structural embeddeness includes degree centrality, be-
tween centrality and constraint; relational embeddedness includes re-
lationship frequency, relationship duration and influence; and finance
performance includes volume, duration and capital costs. The third
level is the definition of each dimension on the second level. According
to the corresponding definitions, we code the interview transcripts
using both qualitative and quantitative methods. It is suggested that
including quantitative data makes case studies more palatable and af-
fords a better mix of qualitative and quantitative data, thereby en-
hancing the confidence of interpretation (Miles et al., 1994; Pratt,
2008). Therefore, after we coded such qualitative data as refinement
capability and exploration capability (see details in Table 2), we further
transcribed SCF operations and process into an adjacency matrix by
social network analysis (SNA) (Table A-1, A-2 and A-3Appendix A).
With UCINET 6.2, we got a more visual description of the network
structure and the embeddedness of both SMEs and FSPs.
From a positivist viewpoint, there are four criteria to safeguard the
rigor of the data and the whole design of this case study (Yin, 2017).
Construct validity is the extent that we can measure the concepts cor-
rectly from reality and discriminate them from others (Voss et al.,
2002). To ensure construct validity, we established a chain of evidence
that makes clear how the links are formed and the conclusions reached.
In addition, we triangulated by collecting our data with different stra-
tegies and from different sources, and transcribe raw materials into
qualitative and quantitative data (Gibbert et al., 2008). Internal validity
puts emphasis on the logic that establishes the causal relationship be-
tween variables and results. We enhanced the internal validity by
building a clear framework through theory triangulation and matching
patterns (Voss et al., 2002). External validity refers to applying findings
to another population and accounting for phenomena in other settings
(Yin, 2017). However, case studies only allow for analytical general-
ization that can be achieved by selecting cases and analyzing them
following replication logic. We selected three cases that are rooted in
three industries to enhance the generalizability of our findings
(Eisenhardt, 1989; Stuart et al., 2002). Reliability addresses the degree
to which researchers may generate the same insights using the same
procedures, which means random error does not exist (Bauer and
Gaskell, 2008; Gibbert et al., 2008). We used interview guidance to
clarify the questions and conduct interviews through more than one
investigation. We also built a database that includes all the documents,
notes, and other forms of data collected. Specifically, the inter-rater
reliability was calculated to measure the agreement during coding
(Voss et al., 2002); the result is 135/151 = 89.4%.
4. SCF solutions provided by FSPs
SCF solutions provided by three FSPs to SMEs are illustrated in
Figs. 2–4. In Fig. 2, Firm A conducts SCF based on its two platforms (a
financial platform and an e-platform). The financial platform focuses on
providing financial services including the credit checking and offering
loans to SMEs. SME a is a kiwi fruit grower that does not have enough
working capital. After signing a sales contract with a fruit company, the
contract is verified by Firm A and the information transmitted to it. The
financial platform of Firm A offers SME a working capital that can only
be used for purchasing fertilizer, pesticides, and other materials for kiwi
fruit planting through the rural e-platform. At the same time, the rural
e-platform, which is also managed by Firm A, traces all the information
along the pipeline. When the contracted kiwi fruits are ripe and are sold
to the fruit company, SME a pays back the loan with interest.
7
International Journal of Production Economics xxx (xxxx) xxxx
In Fig. 3, Firm S acts as the FSP that builds a relatively strong re-
lationship with its partners. Firm S organizes the whole manufacturing
and logistics for SMEs; as an SME, Firm s focuses on the design of
communication devices. After SME s signs a sales contract with its
overseas customer, this contract will be verified by Firm S. At the same
time, a purchase order for production parts will be sent to overseas/
domestic suppliers and all capital are prepaid by Firm S. The assembly
manufacturer then carries out production, and Firm S helps SME s to
deal with custom clearance, tax rebate, freight forward, currency ex-
change, and so on. After finalizing the order, the settlement between
Firm S and the SME s is complete.
In Fig. 4, Firm O needs to integrate upstream and downstream in-
formation through its e-platform. This is the basis for credit and au-
thenticity checks. After SME o, a medium-size trade company, signs a
contract with an overseas customer, it can ask for financial services
from Firm O. Based on the cooperation with commercial banks and
insurance companies, Firm O provides finance and insurance services.
In addition, as the third-party logistics provider participating in its
supply chain network, Firm O helps SME o to transport products to the
overseas customer. With these comprehensive services, SME o can ea-
sily fulfill its contract and get enough liquidity. Finally, SME o will pay
Firm O the capital and interest.
5. Case analysis
5.1. SMEs’ operational capabilities
Although lacking traditional credit, SMEs in these three cases have
better operational capabilities as signals of financing from FSPs.
Managers from FSPs in our interviews frequently mentioned SMEs’ ef-
ficiency and effectiveness in specific areas such as fruit planting and
product design. These characteristics are valuable and crucial signals
that were emphasized by FSPs when conducting SCF. Following the
definitions of operational capabilities from existing literature dealing
with SMEs in supply chains, we coded our data into two complementary
dimensions—refinement capabilities and explorative capabilities.
Table 2 gives a summary of the operational capabilities of SMEs.
Market capacity, order fulfillment, and profitability are three as-
pects that we code from our raw data to form the dimension of re-
finement capabilities upon which SMEs rely to maintain daily opera-
tions. Market capacity is one of the key characteristics of these SMEs
targeted by FSPs. SMEs' ability to attract and retain customers con-
stantly with high-quality and low-price products and services will en-
sure their profitability and long-term growth (Kim, 2014). In our in-
terviews, the CEO of Firm A admitted that they would pay special
attention to those planting and breeding firms, taking their market
prospects into consideration to guarantee the return. SME a's kiwi fruit
is famous for its high quality in both domestic and overseas markets. In
addition, Firm S has integrated many SMEs in its platform that have
contributed nearly 800 million shipments of mobile phones into the
global market. SME s is one of them and has built a strong reputation.
Finally, the general manager of Firm O emphasized the importance of
SMEs' qualifications, which mainly refer to their ability to export high
quality products overseas with preferable prices.
Order fulfillment is mentioned frequently by managers from both
FSPs and SMEs because it directly relates to the use of loans. When the
order is placed, how to allocate all the resources and utilize them ef-
fectively to “deliver the right product/service to the right person at the
right time and the right place” is the fundamental issue for a firm to
address. Apart from the fulfillment rate, FSPs will also refer to some
trivial indicators such as the frequency of procurement and replenish-
ment of key materials and the records of employee recruitment and
turnover. In the case of Firm A, its general managers suggested that
procurement of agricultural materials and equipment can also be sig-
nals that indicate their rate of order fulfillment.
Profitability is one of the essential requirements for making
H. Song, et al. International Journal of Production Economics xxx (xxxx) xxxx

Fig. 2. SCF solutions from Firm A to SME a. Notes:

Process of SCF: (1) SME a signs a fruit sales contract
Agricultural Rural with a fruit company; (2) Firm A verifies the contract
material company
(4) (4) e-platform (4) and shares information with its financial platform;
1 (3) The financial platform and insurance company
offer loans and related financial services to Firm a; (4)
SME a conducts production and processes and inter-
Agricultural (2) (2) acts with agricultural material and facility companies
SME (a) Fruit
material company Firm A on a rural e-platform that is managed by Firm A; the
company rural e-platform transfers all related information
2
along the pipeline; (5) the fruit company receive
(2) kiwis and repays Firm A; (6) SME a pays back the loan
and interest and get its payment.
Agricultural
(6)
facility company Financial Insurance
3 platform company
(3)
(1)
(5)

(3) financing decisions. The lack of financial statements blocks SMEs from
(5)
external financing; however, qualitative details such as business scale,
operating performance for several consecutive years, and price in the
(2) (4) competitive market are all indirect signals of SME performance.
Assembly (4) Moreover, profitability is also related with market capacity and order
SME s Manufacturer
(3) (5) fulfillment. In our cases, SME a, s, and o all keep a stable source of profit
in their respective industries, which easily covers their loans and in-
(7)
Firm S terests.
(3) Overseas
(1) Supplier Technological innovativeness and entrepreneurship by the leaders
(2) 1,2,3… of SMEs are two dimensions of explorative capabilities that we coded in
the study. Technology innovativeness is essential for SMEs in the
Overseas
(6) (6) Domestic manufacture industry, such as Firm s and Firm o in our case studies. As
Supplier the mobile industry is dynamic and volatile, Firm s in this industry has
Customer 1,2,3…
Customs Tax Office Local bank higher innovativeness than the other two SMEs we interviewed. They
need to be very “creative,” according to the CEO of Firm S, which en-
Exchange Bonded Offshore ables the firm to keep up with technological developments. As SME o is
office warehouse bank
an original equipment manufacturer (OEM), it also keeps up with in-
Freight Shipping Inspection dustrial technology in order to fulfill its overseas orders. As a fruit
Company Company office
planting company, Firm a follows relatively traditional routines of
production. Regarding reasons of SCF to competent SMEs, all managers
Fig. 3. SCF solutions from Firm S to SME s. Notes: Process of SCF: (1) SME s of FSPs mentioned that innovative SMEs would survive the cruel
signs a sales contract with an overseas customer; (2) Firm S verifies the contract; competition because of their proactiveness in seizing opportunities and
the overseas customer sends purchase orders to Firm S; (3) Firm S provides
refreshing themselves (Juan García-Teruel & Martínez-Solano, 2007).
finance to SME s; Firm S determines overseas/domestic suppliers; (4) Firm S
The second dimension is the entrepreneurship of the leaders of SMEs.
pays the assembly manufacturer and overseas/domestic suppliers; (5) the as-
sembly manufacturer finalizes manufacturing; (6) Firm S deals with all services
Managers from SME a told us a story about their tenacity in planting
and cooperates with government/finance institutions/third-party logistics fruits, and this has been described by the CEO of Firm A as “dedicated”
providers; (7) SME s pays Firm S. and “tenacious.” The CEO and general manager of Firm S described
SMEs on its platform as “pioneers” and often expressed their appre-
ciation. The General Manager of Firm O used the word “professional”
several times when talking about SME o. Based on these findings, we
propose the following Proposition:

Fig. 4. SCF solutions from Firm O to SME o. Notes:

Inspection office Carrier Process of SCF: (1) Firm O integrates information
Commercial bank from upstream and downstream firms; (2) Firm O
(4) (5)
Tax office Exchange office conducts credit checks for upstream and downstream
Insurance company firms; (3) SME o signs a contract with an overseas
Freight company SinoSure customer; (4) SME o cooperates with commercial
banks and insurance companies; (5) Firm O co-
operates with government/third-party logistics to
(1) (1) provide official services and logistics services for SME
Overseas o; (6) SME o pays Firm O.
SME o Firm O
Customer
(2) (2)
(6)
(3)

8
H. Song, et al.
Fig. 5. Illustration of network configuration of Case A-a.
Proposition 1. FSPs provide working capital finance to target SMEs with
operational capabilities.
5.2. Supply chain network embeddedness
SCF is implemented based on the supply chain network and frequent
business interactions among partners. From this point of view, a supply
chain network is a kind of signaling environment that FSPs and their
partners co-create, and network embeddedness is just the uncontrolled
signal by which SMEs can get working capital.
5.2.1. Network configuration
To analyze the supply chain network of three cases, we constructed
an adjacency matrix containing the information of network configura-
tion that can be used for further analysis of network embeddedness.
Using UCINET 6.2, we made a visualized illustration of three supply
chain networks (see Figs. 5–7) and an overview of their density and
centralization (see Table 3).
Regarding social network analysis, the network density is the ratio
of the actual number of ties owned by nodes to the maximum number of
possible ties in the network (Rowley et al., 2006). Obviously, the higher
the density, the more relations exist between nodes. Case A-a has the
lowest density because the participants in this network are less con-
nected to each other than those in the other two networks. In this case,
SME a, agricultural material companies, planting companies, processing
companies, an insurance company, and a fruit company all have direct
relations with the FSP (Firm A) but have no relations with each other. In
Case S-s, there are not only diverse participants but also multiple ties
between them. For example, overseas and domestic suppliers need to
interact with each other and their common manufacturers. However,
Fig. 6. Illustration of network configuration of Case S-s.
9
International Journal of Production Economics xxx (xxxx) xxxx
Fig. 7. Illustration of network configuration of Case O-o.
Table 3
Network Configuration of three cases.
No. of Ties Network densitya Network centralizationb
Case A-a 34 0.3091 80.00%
Case S-s 126 0.3316 89.47%
Case O-o 46 0.3485 80.00%
Note.
a
Network density is the total number of actual ties divided by the total
number of possible ties which is [N(N-1)]/2, N = the total number of members
in the network.
b
Network centralization calculates the betweenness and normalized be-
tweenness centrality of each vertex. Between centrality is a measure of the
number of times a vertex occurs on a geodesic. Let bjk(i) be the proportion of all
geodesics linking vertex j and vertex k which pass through vertex i. The be-
tweenness of vertex bjk(i) is the sum of all bjk(i) where i, j and k are distinct. The
normalized betweenness centrality is the betweenness divided by the maximum
possible betweenness expressed as a percentage. For a given network with
vertices v1 ….vn and maximum betweenness centrality Cmax=(N2-3N+2)/2, the
network betweenness centralization measure is Ʃ(Cmax - C(vi)) divided by the
maximum value possible, where C(vi) is the betweenness centrality of vertex vi.
other participants involved in finance-oriented activities are not as
closely interconnected as those in production and logistical activities.
Similar to Cases A-a and S-s, network density in Case O-o is also below
0.5, which is a general threshold of the low network density.
However, the centralization of all three networks is relatively high.
This is because the FSPs (Firm A, Firm S, and Firm O) are just the central
point of the network. They have organized the entire supply chain ac-
tivities to integrate physical, informational, and financial flows.
Figs. 5–7 illustrate the three FSPs position in the center of the networks.
5.2.2. Structural embeddedness
Structural embeddedness is a crucial dimension of network em-
beddedness that represents nodes’ network position in terms of cen-
trality and structural holes. In order to disclose key attributes of the
supply chain network in providing SCF, we present the structural em-
beddedness of both the FSPs and SMEs of our three cases (see Table 4).
In the three supply chain networks, node firms' degree centrality
describes the firms' direct relations with other nodes. From the results
of adjacency matrixes, we can draw the conclusion that all FSPs have a
high degree of centrality in their networks. This indicates that FSPs are
exactly at the center of each network and hold the central position.
Betweenness centrality is another indicator of node firms' position by
calculating the possibility of one node's existence between only two
other nodes. The higher the betweenness centrality, the more power the
node firm has to control resources than others do. However, this is not
an absolute indicator but rather serves to make comparisons inside a
network. In our cases, Firm S has the largest betweenness centrality and
H. Song, et al.
Table 4
Structural embeddedness of three cases.
Degree centralitya Betweenness centrality Constraintb
Firm A 10 57 0.317
SME a 9 18.5 0.490
Firm S 19 312 0.117
SME s 7 2.5 0.448
Firm O 10 73 0.224
SME o 6 2 0.574
Note.
a
Degree centrality measures the number of vertices adjacent to a given
vertex in a symmetric graph. For non-symmetric data the in-degree of a vertex u
is the number of ties received by u and the out-degree is the number of ties
initiated by u. The normalized degree centrality is the degree divided by the
maximum possible degree expressed as a percentage.
b lationship duration are high, which is important for facilitating re-
Constraint is a measure of structure holes. Burt’s (1992) constraint measure
is the extent to which ego is invested in people who are invested in other of
ego's alters.
far surpasses SME s. The other two firms reflect a similar situation but
the gap is not that huge. Apart from two centrality indicators, constraint
is used as a proxy of the nodes' occupation on structural holes, and the
lower the better (Burt, 2009). We can see from Table 4 that Firm S also
has the lowest constraint of the three cases. Thus, we can confirm that
Firm S is just at the structural hole of its supply chain network. This
means that Firm S can take advantage of this position to keep in-
formation and opportunity superiority, which is the same as the other
two FSPs. When occupying the structural holes, FSPs can play the role
of joining participants at different functions, integrating processes al-
together. In addition, key information transmission is only taking place
along these pathways created intentionally by FSPs.
What is important for SCF is that the network is an important
context for signaling from SMEs and other related participants.
Compared with FSPs, SMEs have a high degree of centrality but rela-
tively low betweenness centrality. This is because they need to interact
with certain participants in SCF but cannot gain power over them. For
example, in Case S-s and Case O-o, SMEs will only keep monotonic in-
teractions with institutions such as inspection offices and freight com-
panies, but both sides are in ovonic contact with FSPs. This can also be
confirmed by SMEs’ constraint value, which is much higher than that of
the FSPs in each network.
Actually, structural embeddedness is acting as a signal that is un-
controlled by SMEs. These will reveal information about positions of
both FSPs and SMEs. Although the SMEs of these three cases have low
structural embeddedness, FSPs can complement this by configuring
certain networks and taking advantage of their own structural holes.
Based on these findings, we propose the following propositions:
Proposition 2. Target SMEs of FSPs have a moderate level of structural
embeddedness. Specifically, they have 1) a high degree of centrality; 2) low
betweenness centrality; and 3) high constraint.
Proposition 3. FSPs have a high level of structural embeddedness and
occupy the structural holes. Specifically, they have 1) a high degree of
centrality; 2) high betweenness centrality; and 3) low constraint.
5.2.3. Relational embeddedness
Relational embeddedness mainly refers to the quality or strength of
the ties that node firms build with others (Autry and Griffis, 2008). As
SMEs’ business is restricted to limited processes and relatively stable
partners, we analyzed relational embeddedness of supply chain net-
work by cliques. Cliques are used to distinguish certain subgroups from
the whole network by considering mutual ties between each other in a
group of more than three nodes. Table 5 presents cliques in three cases
separated into primary and secondary networks.
10
International Journal of Production Economics xxx (xxxx) xxxx
The separation of primary and secondary networks is in line with
stakeholder theory. Clarkson (1995) and Metcalfe (1998) have sug-
gested that stakeholders of a firm can be defined into two groups: pri-
mary and secondary. The former includes those who have formal con-
tracts and direct transactions with the firm, such as major customers
and suppliers, employees, and investors. The latter are those who have
an impact on the firm's economic activities without direct transactions,
such as commercial banks, logistics service providers, and government
agencies. This separation is suitable for analyzing relational embedd-
edness in our SCF cases. We used relationship frequency, relationship
duration, and the influence index of both FSPs and SMEs in each case
(see Table 6).
Relationship frequency and relationship duration are two common
indicators that reflect the strength of ties between node firms. In the
primary network in each case, both relationship frequency and re-
source exchange and coordination. Furthermore, the trust and com-
mitment generated by these interactions are key to the growth of SMEs
and all the participants in the supply chain network. The FSPs and SMEs
have to maintain communication with certain participants in Case A-a.
SME a always keeps close contact with agricultural material and im-
plement companies in the processes of seed selecting, seeding, and
planting. Also, the seasonal and uncertain characteristics of fruit
planting makes an insurance company another key partner for SME a. In
Case S-s, SME s mainly keeps a close relationship with Firm S, its
overseas customers, overseas suppliers, and integrated manufacturers.
In order to achieve a high level of coordination, SME s must interact
with these partners frequently. In Case O-o, the primary network for
Firm O and SME o includes overseas customers, inspection office, a
freight company, and an insurance company. In addition, SME o has
maintained relatively long and frequent contact with these participants.
However, in the secondary networks, the strength of ties between
SMEs and others are lower than those in the primary network. SMEs
have low or medium level of relationship frequency and relationship
duration. FSPs, as the providers of SCF, still remain high relational
embeddedness in the secondary network. In Case A-a, Firm A is also
responsible for delivery and selling for SME a. It has established an e-
commerce platform for the online selling of fruit. However, the social
network of SME a as a self-employed entrepreneur is composed of re-
latives, neighborhoods and friends in the local area. Even sometimes
Guanxi (the rudimentary dynamic in personalized social networks of
power in Chinese culture) could be used to borrow money, this re-
lationship is short-term oriented. In Case S-s, Firm S owns the virtual
manufacturing platform that is the foundation of the supply chain
network. It can take full charge of operations and financing processes
by connecting production companies such as domestic and overseas
suppliers, a bonded warehouse, and financial or governmental institu-
tions such as commercial banks, an exchange office, a tax office, and an
inspection office. SME s is a design service provider focusing on the
design of communication devices, so they have a close relationship with
brand or marketing service providers in the distribution channel.
However, the relationship is not quite steady and could be replaced
with others. Firm O, as its mission shows, is dedicated to helping SMEs
focus on their core business. Thus, Firm O not only integrates govern-
mental services on its platform but also commercial activities such as
shipping and insurance. Based on the comprehensive network, Firm O
builds trust and facilitates long-term cooperation with SME o. As an
original equipment manufacturer, SME o does not have any other long-
term relationships.
Other than the above two indicators, the influence index is a proxy
of status used in social network analysis considering the direction of
relationships (Borgatti, 2005). In general, if a node in the network is the
terminal of many relationships, then it can be regarded as influential. In
contrast, if relationships received are less than those sent, it will be
influenced by other nodes. Thus, we will compare the influence index
and be-influenced index in our cases to further analyzing relational
H. Song, et al. International Journal of Production Economics xxx (xxxx) xxxx

Table 5
Cliques and separation of networks of three cases.

Cliques Primary network Secondary network

Case A-a {Firm A, SME a, Agricultural {Firm A, SME a, Insurance company, Agricultural materials {Processing company, Rural e-platform, Fruit company}
materials company 1}, company 1, Agricultural materials company 2, Agricultural
{Firm A, SME a, Agricultural materials company 3, Implement company 1, Implement company
materials company 2}, 2}
{Firm A, SME a, Agricultural
materials company 3},
{Firm A, SME a, Implement
company 1},
{Firm A，SMEs a, Implement
company 2}，
{Firm A, Insurance company,
SME a }
Case S-s {Firm S, SME s, Overseas {Firm S, SME s, Overseas company, Overseas supplier 1, Overseas {Domestic supplier 1, Domestic supplier 2, Domestic supplier 3,
supplier 1}, supplier 2, Overseas supplier 3, Integrated manufacturer 1, Freight company, Bonded warehouse, Local bank, Offshore bank,
{Firm S, SME s, Overseas Integrated manufacturer 2} Inspection office, Tax office, Exchange office, Shipping company}
supplier 2},
{Firm S，SME s, Overseas
supplier 3}，
{Firm S, SME s, Integrated
manufacturer 1},
{Firm S, SME s, Integrated
manufacturer 2},
{Firm S, SME s, Overseas
company}
Case O-o {Firm O, SME o, Overseas {Firm O, SME o, Overseas customer, Inspection office, Freight {Tax office, Exchange office, Insurance company, Commercial
customer}, company, Sinosure} bank, Carrier}
{Firm O, SME o, Inspection
office},
{Firm O, SME o, Freight
company},
{Firm O, SME o, Sinosure}

Table 6
Relational embeddedness of three cases.

Primary network Secondary network

Relationship frequency Relationship duration Influence index (Influence/be- Relationship frequency Relationship duration Influence index (Influence/be-
influenced)a influenced)
Firm A High High 3.426/3.426 High High 3.345/3.345
SME a High Medium 3.148/3.426 Medium Low 2.586/2.994
Firm S High High 3.301/3.301 High High 3.087/3.087
SME s High Medium 2.710/2.435 Medium Medium 1.678/1.566
Firm O High High 4.742/4.742 High High 3.361/3.361
SME o High Medium 4.296/2.951 Medium Low 2.617/1.721

Note.
a
Successive powers of matrices provide measures of influence since they enumerate the number of possible walks of given length between all pairs of nodes. Since
longer walks are assumed to contribute less in terms of influence, an attenuation factor is included and the sum of all walks is taken. Thus, the influence matrix is I +
Σ(βA)^i that equals (I - βA)−1 under certain conditions, where A is the adjacency matrix and β is the attenuation factor.

embeddedness. It is also important to note that the FSPs maintain a “influencers” in entire networks.
balanced index in both primary and secondary networks while SMEs Based on these findings, we propose the following propositions:
have a higher influence index in primary networks than in secondary
Proposition 4. Target SMEs of FSPs have a moderate level of relational
networks. This confirms that SMEs gain a higher relational embedd-
embeddedness. Specifically,
edness in primary networks. Particularly, in Case A-a, Firm a as the SME
is the one being influenced in both the primary and secondary networks Proposition 4a. They have 1) high relationship frequency; 2) medium
because its be-influenced index is higher than influence index in both relationship duration; and 3) medium influence in the primary network.
networks. This indicates the relatively disadvantage of SME a in the
Proposition 4b. They have 1) medium relationship frequency; 2) low
supply chain network organized by the FSP. In other two cases, SME s
relationship duration; and 3) low influence in the secondary network.
and SME o keep higher influence indexes in both networks and prove to
be the “influencer.” Proposition 5. FSPs provided have a high level of structural embeddedness
Similar to structural embeddedness, relational embeddedness is also and are the influencers. Specifically, they have 1) a high degree of centrality;
a signal that is uncontrolled by SMEs. In our cases, supply chain net- 2) high betweenness centrality; and 3) high influence in both the primary and
works that both FSPs and SMEs are embedded in can be separated into secondary networks.
levels. Though SMEs are at a low level of relational embeddedness in
secondary networks, they can gain it back in primary networks, which
has a greater effect on their core operations. Furthermore, FSPs main-
tain a high level of relational embeddedness in both networks and are

11
H. Song, et al. International Journal of Production Economics xxx (xxxx) xxxx

Table 7
Working capital finance performance of three cases.

Volume Duration Capital cost rate

Case A-a 100,000–200,000 Yuan (as needed) 1–3 months (flexible) 10–18%
Case S-s 1,000,000 Yuan (as needed) 1–2 weeks (flexible) 15%
Case O-o 300,000 Yuan (as needed) 1 month (flexible) 7–14%

5.3. Signaling: operational capabilities, network embeddedness, and
working capital finance
We coded working capital finance into three dimensions of volume,
duration, and capital cost rate as suggested by Gomm (2010) to mea-
sure the performance in SCF for SMEs (Table 7).
Financing for working capital of SMEs in supply chains are different
with that of large firms. It means that financing should be in relatively
small amounts. In our three cases, the volumes of financing are all
small, sufficient for meeting SMEs short-term cash flow needs in op-
erations, such as payment for processing in advance. Average financing
volumes in Case A-a are much lower than those in the other two cases.
The duration of the financing is not long as the three FSPs have adjusted
their financing schemes to SMEs’ production and operation cycles.
Their needs always come for a short duration but with high frequency.
Most SMEs ask for financing of less than one month, which requires the
working capital financing provided by FSPs to be extremely flexible.
Capital cost rate provided by the three FSPs are lower than 20% per
year and can vary according to their own assessment of SMEs. These
rates are much more attractive than those provided by most commercial
banks in capital markets and are also manageable for SMEs, which
ensures repayment.
In order to relate working capital finance with SMEs’ operational
capabilities and network embeddedness, we present all the codes in
Table 8.
In capital markets, signaling is an effective way for SMEs to get
financing. Because of a lack of traditional hard information to overcome
information asymmetry, SMEs are reluctant to get working capital from
financial institutions. However, operational capabilities of SMEs sur-
viving with operational routines and configurations of resources (Zollo
and Winter 2002) are more suitable to be signals for financing deci-
sions. In our cases, FSPs' treasure refinement capabilities such as order
obtainment and order fulfillment and the resulting profitability ensure
repayment afterwards. Moreover, exploration capabilities about better
adapting to dynamic environments are crucial for SME survival. SMEs
with a higher level of technology innovations and the higher level of the
leaders’ entrepreneurship are also preferred by FSPs. Thus, SMEs will
gain more flexible terms on its working capital finance at a favorable
cost of capital rate.
Based on these findings, we propose the following Proposition:
Proposition 6. The stronger the operational capabilities of target SMEs of
FSPs, the better their working capital finance performance.
In order to enable qualitative signaling, FSPs should also actively
construct the signaling context-supply chain network. In supply chain
networks, the central positions of FSPs empower them to easily receive
valuable signals and reduce the possibility of adverse selection (Wu
et al., 2017). The embeddedness of SMEs indicating their position in the
network and the state of ties that they form with other nodes will have a
significant effect on their business (Muller and Peres, 2018). Though
these signals are completely uncontrolled by SMEs per se, they can
inform FSPs more about the potential of their growth and the ex post
cash flows.
Specifically, SMEs rely more on the network that they are embedded
in (Nyuur et al., 2016). Network embeddedness enhances the possibility
for them to obtain information, technology, talent, and other resources.
The proximities between SMEs and their partners promote joint co-
ordination and trust, both of which are crucial for long-term growth. In
the primary networks, SMEs keep relatively strong relationships with
their upstream and downstream partners, thus reducing external un-
certainties and maintaining steady profitability. In secondary networks,
however, there are a variety of participants who encourage SMEs to
discover and access more market opportunities. Though SMEs’ rela-
tional embeddedness is relatively low in the secondary networks, FSPs
can take advantage of their central positions and coordinate the whole
network by allocating information, finances, and other resources. As a
result, the cost can be minimized while maintaining the flexibility of the
volume and duration.
Based on these findings, we propose the following propositions:
Proposition 7. The stronger the structural embeddedness of the supply
chain network that both target SMEs and FSPs are in, the better their
working capital finance performance.
Proposition 8. The stronger the relational embeddedness of the supply
chain network that both target SMEs and FSPs are in, the better their
working capital finance performance.

Table 8
Operational capabilities, network embeddedness, and working capital finance performance.

Construct Dimension Case A-a Case S-s Case O-o

Operational capabilities Refinement capabilities Medium High High

Exploration capabilities Low High Medium
Network configuration Network density Medium High High
Network centrality High High High
Structural embeddedness (SME/FSP) Degree centrality High/High Medium/High Medium/High
Betweenness centrality Low/High Low/High Low/High
Constraint Medium/Medium Medium/Low Medium/Low
Relational embeddedness (SME/FSP) Relationship frequency Primary network High/High High/High High/High
Secondary network Medium/High Medium/High Medium/High
Relationship duration Primary network Medium/High Medium/High Medium/High
Secondary network Low/High Medium/High Low/High
Influence Primary network Be-influ.ed/Influ. Influ./Influ. Influ.ed/Influ.
Secondary network Be-influ.ed/Influ. Influ./Influ. Influ./Influ.
Working capital finance performance Volume As needed As needed As needed
Duration Flexible Flexible Flexible
Capital cost rate Medium Low Low

12
H. Song, et al.
6. Conclusion and implications
This research explores FSPs’ solutions for SMEs working capital fi-
nancing by addressing the problem of information asymmetry with
signaling. These solutions are different from traditional schemes and
provide insights for both SMEs and financial institutions involved in
SCF.
6.1. Theoretical implications
First, we identify different kinds of SME operational capabilities that
can be used as effective signals for SCF. From the perspective of the
integrative signaling view, operational capabilities are signals that are
partially controlled by SMEs. As SMEs are at the start up stage, these
capabilities generated from supply chain operations are more important
for their survival in an unstable environment (Winter 2003). Opera-
tional capabilities represent SMEs’ specific skills about leveraging
multiple resources (Kortmann et al., 2014). This study suggests that
there are two kinds of operational capabilities, refinement capabilities
and exploration capabilities. Incremental refinement, which in our
study includes market capacity, order fulfillment, and profitability,
mainly deals with fundamental and line activities and is in line with the
zero-order or first-order capabilities identified in previous studies (Zollo
and Winter 2002; Winter 2003). In addition, continuous exploration
that surpasses fundamental actions relates to the improvement and
renewal of the enterprises, which is measured as the technology in-
novativeness and entrepreneurship of the leader, thereby keeping SMEs
competitive in the future market. Thus, this kind of capability indicates
the reliability and sustainability of the business and are essential factors
for FSPs in making decisions about financing.
Second, we clarify the attributes of supply chain networks com-
prised by SMEs and FSPs. According to signaling theory, the network
constructed by FSPs deliberately provides a context for signaling.
Previous studies also considered the network to be an important signal
environment, where the use of information and ties can reduce adverse
selection (Ozmel et al., 2013; Wu et al., 2017). However, the respective
positions and relationships of FSPs and SMEs in the network are un-
derexplored. This study indicates the main attributes of supply chain
networks including structural embeddedness and relational embedd-
edness determine the performance of SCF. As shown in case studies,
FSPs actively construct transactional networks with SMEs and other
stakeholders and promote SCF through network relationships. Specifi-
cally, structural embeddedness mainly deals with the construction of
these ties. Centrality and the occupation of structural holes makes FSPs
the key player in the network. With the control of information and
resources, FSPs gain information superiority that is crucial for financing
of SMEs. Regarding relational embeddedness, SMEs interact with their
partners that have the most influence on their operational and financing
working capital. The relationship that SMEs built with their primary
network participants generates trust that lays the foundation for SCF.
This institutional trust is based on familiarity and frequent transactional
interactions, thus forming an assumption of favorable behaviors of
SMEs (Zucker, 1987). FSPs always play a crucial role in the network,
either by constructing the context of signaling or participating in this
integrative signaling process, and optimizing the efficiency of SCF.
Third, we explore the mechanism about how do operational cap-
abilities and supply chain networks reduce information asymmetry and
enhance availability of working capital. Previous studies have sug-
gested that signaling is an effective way to reduce the probability of
moral hazard and exploitation by borrowers (Connelly et al., 2011).
However, due to the lack of sound financial statements and pledged
assets, it is difficult for SMEs to transmit their signals. Even if these
13
International Journal of Production Economics xxx (xxxx) xxxx
signals can be displayed, it is difficult for lenders to judge the authen-
ticity of the information because these signals are intentionally trans-
mitted by SMEs. This study proposes an integrative signaling model that
emphasizes that signals come from the business interactions of all
participants in the supply chain. In other words, the signals required in
the SCF must be structured, objective, and free from borrower manip-
ulation. Both market position (Lee et al., 2018) and specific capabilities
of SMEs are signals uncontrolled by borrowers from an integrative
signaling view. Moreover, FSPs take the initiative in constructing the
network for SMEs, FSPs, and other stakeholders and organize transac-
tional processes at the intersection of logistics, supply chain colla-
boration, and finance in order to capture the signals that the borrowers
have difficulty in controlling (Hofmann, 2005). This creates a context of
integrative signaling in which SMEs can take advantage to make
themselves stand out among other less qualified borrowers.
6.2. Managerial implications
There are also several implications for managers or institutions that
provide SCF for SMEs. First, FSPs should pay more attention to the
construction of supply chain networks. This means that FSPs should
innovatively create signaling environments rather than passively re-
ceiving signals sent by SMEs, which indicates that participants orga-
nized in the network extend beyond lenders and borrowers to include
suppliers and customers, SMEs’ upstream/downstream, 3 PL, and fi-
nancial institutions. Furthermore, transaction and information flows
can be strengthened and activities such as factoring, insurance, and
taxation are all integrated to achieve the financing goal. At the position
of structural hole and the center of the network, FSPs can gather the
necessary information and resources to avoid ex post default of SMEs.
Second, operational capabilities of SMEs should be given more at-
tention than traditional financial statements. SME capabilities ensure
their debt repayment as well as the sustainability of the whole SCF
scheme. To enhance their refinement capabilities, SMEs should focus on
the former market capacity, order fulfillment, and profitability, while to
enhance their explorative capabilities, SMEs should put more efforts on
the technology innovativeness and entrepreneurship of their leaders.
Finally, their embeddedness in the network should also be con-
sidered by financial providers. In terms of structural embeddedness,
SMEs should build flexible ties with different stakeholders. As for re-
lational embeddedness, SMEs should also keep their relationship with
specific stakeholders for the necessary frequency and duration.
6.3. Limitations and future research
Apart from above implications, there are also some limitations. As
signaling is a useful mechanism for dealing with information asym-
metry in SCF, we can also look into this problem from the perspective of
stakeholders. For example, how the participation and feedback of third-
party logistical service providers and governmental institutions will
influence the efficiency and effectiveness of financing needs further
discussion. Moreover, FSPs in this study are all in the manufacturing
industry, while future studies could compare different types of FSPs.
Finally, we only conducted a multi-case study to investigate how dif-
ferent signals affect working capital financing for SMEs. Based on our
findings, future research may measure these constructs with reasonable
items and examine the relationship with an empirical study.
Acknowledge
The research underlying this paper was supported by the National
Natural Science Foundation of China (No. 71872177, 71672189).
H. Song, et al. International Journal of Production Economics xxx (xxxx) xxxx

Appendix A

Table A-1
The matrix of Case A-a

Firm Insurance Firm Agricultural Agricultural Agricultural Implement Implement Processing Rural E- Fruit
A a Materials Company Materials Company Materials Company Company 1 Company 2 Company platform Company
1 2 3

Firm A 0 1 1 1 1 1 1 1 1 1 1
Insurance 1 0 1 0 0 0 0 0 0 0 0
Firm a 1 0 0 1 1 1 1 1 0 1 0
Agricultural 1 0 1 0 0 0 0 0 0 0 0
Materials
Company 1
Agricultural 1 0 1 0 0 0 0 0 0 0 0
Materials
Company 2
Agricultural 1 0 1 0 0 0 0 0 0 0 0
Materials
Company 3
Implement 1 0 1 0 0 0 0 0 0 0 0
Company 1
Implement 1 0 1 0 0 0 0 0 0 0 0
Company 2
Processing 1 0 1 0 0 0 0 0 0 0 0
Company
Rural E-platform 1 0 0 0 0 0 0 0 0 0 1
Fruit Company 1 0 0 0 0 0 0 0 0 0 0

Table A-2
The matrix of Case S-s

Firm Overseas Firm Overseas Overseas Overseas Domestic Domestic Domestic Integrated
S Customer s Supplier 1 Supplier 2 Supplier 3 Supplier 1 Supplier 2 Supplier 3 Manufacturer 1

Firm S 0 1 1 1 1 1 1 1 1 1
Overseas Customer 1 0 1 0 0 0 0 0 0 0
Firm s 1 1 0 1 1 1 0 0 0 0
Overseas Supplier 1 1 0 0 0 0 0 0 0 0 0
Overseas Supplier 2 1 0 0 0 0 0 0 0 0 0
Overseas Supplier 3 1 0 0 0 0 0 0 0 0 0
Domestic Supplier 1 1 0 0 0 0 0 0 0 0 0
Domestic Supplier 2 1 0 0 0 0 0 0 0 0 0
Domestic Supplier 3 1 0 0 0 0 0 0 0 0 0
Integrated 1 0 1 0 0 0 0 0 0 0
Manufacturer 1
Integrated 1 0 1 0 0 0 0 0 0 0
Manufacturer 2
Freight Company 1 0 0 0 0 0 0 0 0 0
Bonded Warehouse 1 0 0 0 0 0 0 0 0 0
Local Bank 1 0 0 0 0 0 0 0 0 0
Offshore Bank 1 1 0 1 1 1 0 0 0 0
Inspection 1 0 0 0 0 0 0 0 0 0
Tax Office 1 0 0 0 0 0 0 0 0 0
Exchange Office 1 0 0 0 0 0 0 0 0 0
Insurance 1 0 0 0 0 0 0 0 0 0
Shipping Company 1 1 0 0 0 0 0 0 0 0

Integrated Freight Bonded Local Offshore Inspection Tax Exchange Office Insurance Shipping
Manufacturer 2 Company Warehouse Bank Bank Office Company

Firm S 1 1 1 1 1 1 1 1 1 1
Overseas Customer 0 0 0 0 0 0 0 0 0 0
Firm s 0 0 0 0 0 0 0 0 0 0
Overseas Supplier 1 0 0 0 0 1 0 0 0 0 0
Overseas Supplier 2 0 0 0 0 1 0 0 0 0 0
Overseas Supplier 3 0 0 0 0 1 0 0 0 0 0
Domestic Supplier 1 0 0 0 1 0 0 0 0 0 0
Domestic Supplier 2 0 0 0 1 0 0 0 0 0 0
Domestic Supplier 3 0 0 0 1 0 0 0 0 0 0
Integrated 0 0 0 1 0 0 0 0 0 0
Manufacturer 1
Integrated 0 0 0 1 0 0 0 0 0 0
Manufacturer 2
Freight Company 0 0 0 0 0 0 0 0 0 0
Bonded Warehouse 0 0 0 0 0 1 0 0 1 0

14
H. Song, et al. International Journal of Production Economics xxx (xxxx) xxxx

Table A-2 (continued)

Integrated Freight Bonded Local Offshore Inspection Tax Exchange Office Insurance Shipping
Manufacturer 2 Company Warehouse Bank Bank Office Company

Local Bank 0 0 0 0 0 0 0 0 0 0
Offshore Bank 0 0 0 0 0 0 0 0 0 0
Inspection 0 0 0 0 0 0 0 0 0 0
Tax Office 0 0 0 0 0 0 0 0 0 0
Exchange Office 0 0 0 0 0 0 0 0 0 0
Insurance 0 0 1 0 0 0 0 0 0 1
Shipping Company 0 0 0 0 0 0 0 0 1 0

Table A-3
The matrix of Case S-s

Firm O Firm o Overseas Customer Inspection Tax Office Exchange Office Insurance Commercial Bank Freight Company Carrier SinoSure

Firm O 0 1 1 1 1 1 1 1 1 1 1
Firm o 1 0 1 1 1 1 0 0 1 0 0
Overseas Customer 1 1 0 0 0 0 1 1 0 1 1
Inspection 1 0 0 0 0 0 0 0 0 0 0
Tax Office 1 0 0 0 0 0 0 0 0 0 0
Exchange Office 1 0 0 0 0 0 0 0 0 0 0
Insurance 1 0 0 0 0 0 0 0 0 0 0
Commercial Bank 1 0 1 0 0 0 0 0 0 0 0
Freight Company 1 0 0 0 0 0 0 0 0 0 0
Carrier 1 0 0 0 0 0 0 0 0 0 0
SinoSure 1 0 0 0 0 0 0 0 0 0 0

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