Corporate innovation and trade credit demand: Evidence from China

Abstract

This study investigates the linkage between trade credit demand and corporate innovation. The estimations are robust to a series of covariates, fixed‐effect, instrumental variable modeling, and the difference‐in‐difference approach. Our findings reveal that the nexus between enterprise innovation and trade credit demand is positive and statistically significant. The said attachment is more visible in private, financially constrained, small, and high‐tech enterprises. The study also found that innovative firms relied heavily on trade‐credit financing after the financial crisis of 2008. Managers should carefully design trade‐credit agreements because operating suppliers have an important role in the enterprises' radical growth activities.