Abstract
How does financial slack affect the firm performance of small and medium-sized manufacturing enterprises (SMMEs)? By integrating the literature on financial slack and the institutional perspective, we predict the following: financial slack positively affects the firm performance of SMMEs; research and development (R&D) investment mediates the effect of financial slack on firm performance; and government subsidies and market-supporting institutions positively moderate this mediating effect. Using 543 firms’ 4489 firm-year observations of Chinese SMMEs, the empirical results indicate that financial slack promotes firm performance. In addition, R&D investment partially mediates the relationship between financial slack and firm performance. Moreover, the relationship between financial slack and R&D investment is weakened in high levels of government subsidies, and the relationship between R&D investment and firm performance is strengthened in high levels of government subsidies and market-supporting institutions. Theoretical contributions, practical implications, limitations, and future research avenues are discussed.
| Original language | English |
|---|---|
| Article number | 107530 |
| Journal | International Journal of Production Economics |
| Volume | 223 |
| DOIs | |
| State | Published - May 2020 |
| Externally published | Yes |
UN SDGs
This output contributes to the following UN Sustainable Development Goals (SDGs)
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SDG 9 Industry, Innovation, and Infrastructure
Keywords
- Chinese SMMEs
- Financial slack
- Firm performance
- Government subsidies
- Market-supporting institutions
- R&D investment
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