Mechanism Of Social Capital Affect The Financing Decision Of SME: Based On The Analysis Of Hunan Province

Financing problem is very essential for the survival and development of small andmedium enterprises (SME), and it is very significant for economy. For difference ingeography, enterprise background, the industry and capital portfolio, financing channelsare tightly connected with specific contexts. So, the research of financing problemshould take context into consideration, especially the social and economic factors inChina. For mainly relying on material capital and operational effects, SMEs are facingfierce financing troubles. So, social capital, which is generally reflected as socialrelations, has great influence on SME financing. And related research can not only helpon exploring new channels for SME financing, but also explaining the characteristics ofSMEs and understanding the internal rational of SMEs development in China’s context.Thought some researches had focused on the relations of social capital andfinancing, the context has very scarcely been considered. So, though we know socialrelations can improve financing, while the mechanism of these relations is not clear, andwhy the relations can be built is ignored. For enterprise management, how to makefinancing decision in terms of social capital is not sufficiently researched. So, this paperis mainly focused on social capital structure analysis, and constructs the theoreticalmodel containing social capital and financing decision, as well as explains relatedmechanism.This paper reviewed related researches on financing, social capital and the relationof social capital and financing, and find out the research points for this paper. Then,based on literature review and theoretical research, this paper defines related researchterms. Taking Hunan as a case, this paper studies the financing characteristics, and thebarriers for financing. From the angles of social capital formation, function mechanism,influential effects, this paper constructs the social capital structure, which has threedimensions of relation, structure and political relation. Then, we study the mechanismof different dimensions on financing decision, and form related hypothesis. Because themechanisms of traditional SME and hi-tech SME are different, this paper thinks theenterprise type moderate the social capital on financing decision. Based on above, weconstruct the relation model, and form the empirical model with the data from HunanSMEs. Finally, we put forward policy suggestions.From mechanism analysis and empirical study, we have the conclusions as below:(1) social capital has3dimensions: structural capital, relational capital and politicalcapital.(2)political capital has most significant influence on extroversion financingdecision, structural capital has significant influence on it too.(3) for relational capital, for it has second tier variables such as relational strength, relational time and relational attributes, the path coefficient are different. Strong relationhas no significant influence on introversion financing decision, while relational time andrelational attributes have significant relations with financing decision.(4) the type of enterprise has modulate effect on financing decision, indicatingtraditional and hi-tech enterprises have significant differences on financing demand andfinancing selection. The main reason is that traditional SMEs are generally low riskbased, and the social capital is simple; while hi-tech SMEs are at high risk, so theconstruction of social capital is more difficult.As for the conclusions above, we give suggestions from policy making, SMEsmanagement.