Financing Approaches For Small And Medium-sized Enterprises In Western China Based On Industry Cluster

Funds are the blood that maintains the functioning of an enterprise. All operations have to be supported and facilitated by funds. Shortage of funds is the major problem to be tackled by medium and small sized enterprises in western China in their process of growth. The development and growth of industry cluster in western China recent years have not only enhanced the competitive advantages of medium and small sized enterprises by also brought new inspirations to the building of financing channels.This thesis first briefly introduces the background and implications of the subject, the research methods and innovation points. Then the second part of the thesis defines the research object—medium and small sized enterprises in western China, generalizes the types of financing methods for them, explains the Theory of Asymmetric Information and analyzes the effects of moral risk and adverse choice brought about by it on financing. The discussion of the relative theories concerning industry cluster provides a theoretic basis for the parts to come.The third part discusses industry and financing methods of medium and small size enterprises in western China, starting with the current financing situations of medium and small size enterprises and the reasons. It illustrates the capitalization of the characteristics including regional advantages and external economy to reduce operation costs and increase the competitive strengths of enterprises. The most manifest one is to improve the ability to create and acquire wealth so as to increase capital accumulation and internal financing ability, and reduce the dependence on external funds. And in addition, the increase of surplus may enable enterprises to help each other with their idle funds. Specialized division and coordination among them based on industry clusters maintain a long-term and stable partnership, increases the truthfulness of information and reduces the cost of information collection and risk of asymmetry, thus enhancing the capability of direct financing and clearing the indirect channels.The fourth part of this thesis discusses the general view of financing approaches of small and medium-sized enterprises in Western China based on industry clusters. The development of all organizations shall rely on the scientific analysis of the environment and a mastery of the key factors affecting the survival and growth of organizations. Meanwhile, through the analysis of the internal factors, the strengths and weaknesses shall be clearly understood. Sequentially, a general view of the development of organizations could be drawn by means of combining both internal and external advantages. These are the basis of the concept of the financing approaches for small and medium-sized enterprises in western China proposed in this thesis. Because of their small size, there is space for development, potential of growth, adaptability and responsiveness. On the other hand, their small size also spells some disadvantages. However, they will acquire similar strengths of big ones when united, and achieve a win-win situation through mutual support. Financing strategy for small& medium-sized enterprises in western China based on industry cluster means that through industry clustering, small& medium-sized enterprises in western China form united entities of mutual help, integrate internal resources by means of cooperation, increase credibility and improve external financing channels with prompt and effective planning of fund-raising.The fifth part discusses the practical financing approaches of small and medium-sized enterprises in western China based on industry cluster. The shortage of funds can be solved by mutual help of internal funds and mutual warranty. This thesis explains their realization respectively with cases of helping foundation and warranty institutions, and discusses some practical issues as the organizational structure, operational procedures and resource of funds, which have some reference value for the solution to financing bottleneck facing the small& medium-sized enterprises in western China.