The impacts of financing constraints on the quality upgrading of China's agri-food exporters

Purpose - The purpose of this paper is to identify the impacts of financing constraints on the quality upgrading of China's agri-food sector. Design/methodology/approach - Our empirical study is performed using the distance to the frontier framework. We employ a merged sample of Chinese agri-food trading firms based on Chinese firm-level data from the National Bureau of Statistics of China and Chinese customs data. To verify robustness, we test whether the results hold when using different definitions of quality upgrading and alternative proxy variables for product quality and financing constraints. To examine the heterogeneous effects, we generate subsamples by firm location, export destination and the product sophistication of exports. Findings - The results suggest that financing constraints have a significant negative impact on the product quality upgrading of Chinese agri-food export firms. In addition, the negative impacts of financing constraints are more severe for firms close to the quality frontier than for those far from the frontier. These results are robust to various checks. Moreover, the heterogeneous effects of financing constraints on quality upgrading are identified when the sample is split according to firm location, export destination and the sophistication of export products. Originality/value - This paper reviews and applies some recent studies in the literature to investigate the relationship between financing constraints and the product quality upgrading of agri-food export firms in China. Overall, the results of this paper could be considered of importance for promoting the quality upgrading of export products in the China's agri-food sector.

Automated summary

The study identifies a significant negative impact of financing constraints on the product quality upgrading of Chinese agri-food export firms, especially for those closer to the quality frontier. The heterogeneous effects of financing constraints on quality upgrading are observed when the sample is split by firm location, export destination, and product sophistication.