Formal Versus Informal Finance and SMEs’ Participation in Global Value Chains

This study examines the impact of various sources of formal and informal finance on small and medium enterprises’ (SMEs) participation in global value chains (GVCs). Employing a rich panel dataset on Vietnamese private manufacturing SMEs during the period 2005–2013, it finds that short-term formal and informal loans do not have statistically significant effects on SMEs’ participation in GVCs, but trade credit does. Using the instrumental variable approach, we have also addressed the endogeneity concern in the trade credit — SMEs’ participation in GVCs. Our study contributes to SMEs’ internalization process in developing countries, where trade credit plays an important role in this process.

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Publication Details

Journal
Journal of International Commerce Economics and Policy
Published
2025-09-13
DOI
https://doi.org/10.1142/s179399332550022x
Primary Topic
Housing, Finance, and Neoliberalism
Type
article
Field-Weighted Citation Impact
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article

Formal Versus Informal Finance and SMEs’ Participation in Global Value Chains

Thang Ngoc Bach, Hanh Hong Nguyen
Journal of International Commerce Economics and Policy
Housing, Finance, and Neoliberalism
article

Formal Versus Informal Finance and SMEs’ Participation in Global Value Chains

Thang Ngoc Bach, Hanh Hong Nguyen
article en

Abstract

This study examines the impact of various sources of formal and informal finance on small and medium enterprises’ (SMEs) participation in global value chains (GVCs). Employing a rich panel dataset on Vietnamese private manufacturing SMEs during the period 2005–2013, it finds that short-term formal and informal loans do not have statistically significant effects on SMEs’ participation in GVCs, but trade credit does. Using the instrumental variable approach, we have also addressed the endogeneity concern in the trade credit — SMEs’ participation in GVCs. Our study contributes to SMEs’ internalization process in developing countries, where trade credit plays an important role in this process.

Journal of International Commerce Economics and PolicyVol. 17(01)
National Economics University (VN), The State Bank of Vietnam (VN), Banking Academy of Vietnam
Openalex Percentile: Top 68%
Housing, Finance, and Neoliberalism
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Formal Versus Informal Finance and SMEs’ Participation in Global Value Chains — Thang Ngoc Bach, Hanh Hong Nguyen · Journal of International Commerce Economics and Policy (2025) | TGRS Research Map | TGRS