A Study On Design And Application Of R&D Index From Chinese Listed Companies

2015 sees that Prime Minister Li Keqiang emphasizes the importance of "mass entrepreneurship and innovation" and regards them as a new engine fueling Chinas economic future growth. At present, China is undergoing the crucial stage of economic institutional transformation and the development of history. It is essential to create an atmosphere in society at large favorable for encouraging innovation if we want to turn our country into the innovative country and realize the Chinese dream of the great renewal of the Chinese nation. "Mass entrepreneurship and innovation" shows the arrival of the era of knowledge-driven economy, while Chinese companies are going to become the main force of Chinese economic development. The report of the 13th Five-Year Plan of CPC has emphasized the importance that Chinese companies should lead the main process of innovation, which shows the companies will play a more and more important role in future stage for the innovation. The level of innovation capability will have a great impact on Chinese future economic development.However, innovation has the characteristic of high risk, which has been affected by environmental uncertainty (Zhuoer Yang,2016), project complexity and innovation capability of the company (Xiaofeng Li,2005). Blindly encouraging innovation does not necessarily produce better returns. Rational innovation should weigh the benefits and risks leading by innovation process, and companies’ innovation ability should also be taken into account before any sensible judgments are made. But we still don’t have an evaluation system which is generally recognized for companies’ R&D performance, which is potentially harmful to companies’ R&D decision. The dissertation tries to solve the problem by building the R&D Index to reflect the ability about creating value by companies’ innovation activities. Index is usually used to reflect complex economic problems, which helps people understand and evaluate these economic issues. Some indexes is often used by management to make decisions. Using R&D Index to reflect companies’ R&D performance can not only overall consider of various factors but also promote the popularization and application.For the purpose of scientifically reflecting the ability about creating value by companies’innovation activities, the dissertation bases on the accounting information to search for the scientific and reasonable way to build R&D Index. Moreover, this dissertation calculates R&D Indexes by taking the main board listed companies of Shanghai and Shenzhen stock market in 2007-2014 as the study sample. Then testing the index’s reliability and validity. The main steps of this dissertation are as described below.Firstly, the dissertation summarizes the existing literature and views about companies’R&D performance evaluation. And some commonly used methods of building index have also been summarized, including Intangible assets index, creative index, Zhong Guancun Index, China Innovation Index and patent index. After that, this paper introduces the concept of R&D Index, which reflects the ability about creating value by companies’innovation activities within a certain period of time.Secondly, the model of creating value for R&D activities is been discussed based on the discounted cash flow model. And different kind of influence factors are considered by the model. Using logical analysis, the dissertation divides the process of creating value for R&D into four aspects as followed:innovation input, technical level, innovation environment and innovation output.Thirdly, selecting indicators from existing research based on the four aspects. Then retain the final 18 indicators after availability screening, correlation screening, principal component selection and rational judgment. The dissertation uses the entropy method empowerment to give different weighting coefficient to the 18 indicators. And finally it comes into R&D Index evaluation system.Fourthly, testing the reliability and the validity of the designed R&D Index. The study says that indicators’ weights have stability, which is not affected by time span. Industry distribution of samples is similar to the market. High-tech companies have significantly higher scores of R&D Index then normal companies. Companies which have higher scores of R&D Index have higher stock prices and ROE. The study supports that R&D Index has the reliability and the validity.Firstly, comparing with economic cycle and protection of intellectual property rights, the study finds that R&D Index has a counter cyclical change with economic cycle. Which shows that economic growth and increasing efforts in protecting intellectual property rights on one hand improve the innovation environment, on the other hand, they also reduce the innovation input. But finally they will enhance the ability about creating value by companies’innovation activities, the research supports to strengthen the protection of intellectual property rights.Sixthly, the dissertation builds Industry R&D Index and Regional R&D Index using R&D investment as a weight. The results are in agreement with the practical experience. R&D Index is consistent with economic fluctuations at the national level, which proves that accounting information has the ability to reflecting the macroeconomic problems.The theoretical contribution of this dissertation is to put forward the concept of the R&D Index and try to use it to reflects the ability about creating value by companies’innovation activities. The practical significance of this dissertation is to design companies’R&D Index evaluation system and test its reliability and validity. The R&D Index allows people to succinctly evaluate companies’ R&D level, which is convenient for the application of the R&D Index. The conclusions of this dissertation may offer some reference for the study of R&D performance evaluation.