Cao, Zhangfan, Chen, Steven Xianglong 
ORCID: 0000-0003-0142-2654 and Lee, Edward
(2022)
Does business strategy influence interfirm financing? Evidence from trade credit.
Journal of Business Research, 141.
pp. 495-511.
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Abstract
This paper investigates the impact of business strategy on firms’ trade credit policies. We find that firms following an innovation-oriented strategy (prospectors) offer significantly more trade credit to their customers than those following an efficiency-oriented strategy (defenders). Furthermore, by exploiting two exogenous shocks to the supplies of high-skill employees and bank credit, we find that prospectors curtail trade credit in response to the reduction of talent mobility following the adoption of Inevitable Disclosure Doctrine, whereas defenders significantly increase provisions of trade credit following the increase in bank credit supply due to the relaxation in interstate branching regulations. Additional evidence substantiates that prospectors increasing trade credit provisions enjoy higher sales generation efficiency and superior performance. Finally, our supply chain analysis documents that prospectors also receive significantly more trade credit from their suppliers. Collectively, our findings highlight that business strategy is an important yet intrinsic determinant of supply chain financing.
| Item Type: | Article |
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| Uncontrolled Keywords: | Business strategy, Trade credit, Supply chain financing, Customer-supplier relationship, Prospector, Defender |
| Divisions: | Faculty of Humanities and Social Sciences > School of Management |
| Depositing User: | Symplectic Admin |
| Date Deposited: | 28 Feb 2022 08:50 |
| Last Modified: | 29 May 2023 01:30 |
| DOI: | 10.1016/j.jbusres.2021.11.050 |
| Related URLs: | |
| URI: | https://livrepository.liverpool.ac.uk/id/eprint/3149744 |
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