Managerial Myopia And Innovation Investments Study

In the knowledge-based economy, innovation is the core for the enterprises’existence and development, which is depended by the increase of Research and Develoment (Hereinafter referred to as R&D) investments. R&D is the source and power of growth, and is helpful for characteristic formation and market occupation for enterprises in incentive market competition. However, comparing with other operating activities, R&D activities are more risky with longer return cycle and higher failure probability. R&D investments will reduce current fund available for distribution, while can also bring the huge earnings in future, therefore, managers must trade off between the existing and long-term interests. Then, how the managers make decisions when they face innovation projects with good prospects? Will they make investment decisions for the firm’s value maximization, or show R&D investments myopia behavior due to the consideration of short-term financial performance or their own occupational safety? These questions regarding to firm’s innovation activities, especially R&D invsements activities are needed to be answered.Based on this, around the R&D investments issue, choosing National-Recognized Enterprise Technology Centers in China which are innovation leaders and are typical representative in innovation activities as research object, this paper starts from the firm’s policymakers-managers, explores the specific performance and effect of managerial R&D investments myopia, and developments research in the following aspects with some achievements.Fistly, based on the existing research of managerial myopia behavior, this paper constructs the model for identifying managers R&D investment myopia behavior. Through tracing back to the theories regarding to the motivation of managerial myopia behavior, we have pointed out that the most direct target of managerial myopia behavior is pursueing short-term financial performance. In view of this, this paper identifies the firms in which managers have strongest motivation of R&D investments myopia and they can avoid short-term financial targets missing by cutting R&D investments. The analysis here has laid a foundation for our further study.Secondly, considering that the managers’investments decision will affect firm’s financial informantion and stock market performance directly and deeply, from the two aspects above, this paper investigates that when the managers tend to make R&D investments decision myopically, how this behavior affect R&D information disclosure and market return? From the perspective of financial information, since R&D capitalization is allowed under the the new Accounting Standard for Business Enterprises in China which endues managers with wider power to measure R&D expenditures discretionally, this paper tests whether managers with myopy tendency under short trem performance pressure will adjust R&D information to "mask" financial performance information which deviates from objectivity and fairness requested by the user. From the perspective of market performance, this paper discusses market reaction of managerial R&D investment myopia to resolve issue we conderned, namely, how the investors interpret positive earnings growth in the presence of cuts in R&D spending?Finally, for the extensive and universal impact of tax credit policies, this paper researches the external policies governance effect of managerial R&D investment myopia takeing the R&D tax credit policies as an example. First of all, this paper explores incentive effect for R&D activities by using propensity score matching which is scientific and reasonable research method for policy effect test, and supportive conclusions are obtained. Based on these results, this paper investigates whether the R&D tax credit policies can restrain managerial R&D investments myopia, in other words, whether the R&D tax credit policies can restrain R&D investments cutting effectively.In conclusion, based on perspective of enterprise, this paper studies manageres’ decisions of innovation investments and their consequences through searching R&D data information manually, and provides first-hand and detailed evidence, in order to provide certain reference for academics and practice observers.