Entrepreneurial vibrancy, financing constraints and heterogeneous innovations: evidence from Chinese private enterprises

This paper examines how the entrepreneurial vibrancy of a city impacts the relationships between financing constraints and private SMEs' heterogeneous innovations (i.e. exploration and exploitation). Using the random-sample of Chinese private enterprises, surveyed by the World Bank from December 2011 to February 2013, we find that financing constraints significantly restrain private SMEs' exploration yet have no significant influence on their exploitation. In addition, in the cities with a high level of entrepreneurial vibrancy, the negative effect of financing constraints on exploration would be weakened, while the effect on exploitation turns negative.