Social Capital, Market Transition, And Loan Acquisition: The Importance Of Network Embeddedness For Chinese Firms

Abstract

Research confirms that social networking is a significant predictor of firm financing in capitalist economies, but little is known about its effect in transition economies. This paper examines the role of market network ties in 3,263 firms in securing banks loans in China's transition economy. The results demonstrate that social networking is a significant predictor of a firm's success in securing loans. Surprisingly, it has the same positive impact on both state-owned and nonstate enterprises’ financing outcomes. These results suggest that social capital influences firms' abilities to acquire financing regardless of ownership form in China's transition economy.