Financing is a critical bottleneck problem in the development process of SMEs. SMEs’ business activities are more closely embedded in the network, because the geographical location closeness facilitates the exchange of information and the diffusion of knowledge. We try to explore how the cluster network relations affect the efficiency of SMEs external financing efficiency. This paper takes a close look at firm financing patterns and factors that influence external financing performance of SMEs in clusters. However, our results suggest that financing from bank is the main financing pattern. We also find inter-firm trust is positively related with external financing efficiency and this positive relationship is moderated by the level of Guanxi. Theoretical and managerial implications are discussed.
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