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Do Social Capital Building Strategies Influence the Financing Behavior of Chinese Private Small and Medium-Sized Enterprises?


  • Jun Du,

    Corresponding authorSearch for more papers by this author
    • Jun Du is a senior lecturer at Aston Business School, Aston University, Birmingham, United Kingdom, B4 7ET; an associate at the UK Enterprise Research Centre; and a Research Fellow at the Stockholm China Economic Institute, Stockholm School of Economics, PO Box 6501, 113 83 Stockholm, Sweden.
  • Alessandra Guariglia,

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    • Alessandra Guariglia is a professor in the Department of Economics, University of Birmingham, Edgbaston, Birmingham, United Kingdom, B15 2TT.
  • Alexander Newman

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    • Alexander Newman is a senior lecturer in the Department of Management, Monash University, Caulfield East, Victoria 3145, Australia.


Using data from 65,485 Chinese private small and medium-sized enterprises over the period 2000–2006, we examine the extent to which firms can improve access to debt by adopting strategies aimed at building social capital, namely entertaining and gift giving to others in their social network, and obtaining political affiliation. We find that although entertainment and gift-giving expenditure leads to higher levels of total and short-term debt, it does not enable firms to obtain greater long-term debt. In contrast, we demonstrate that obtaining political affiliation allows firms greater access to long-term debt.