Financing Constraints, Managerial Incentives And Firm R&D Efficiency

Research and development(R&D) is the important means to form the core competitiveness of firms. To reveal the motivation of R&D and improve the level of R&D in the firms, scholars have examined the relationships between the firm scale, government grants, intellectual property right protection, financial development and R&D from different angles of view. However, limited by the limitations of research perspectives, the related research results still fails to explain why different firms in the same environment have the different R&D performance. To answer this question, this paper finds that the managerial incentives and financing constraints are the key factors influencing the firm R&D with the principal-agent theory and information asymmetry theory, and emphatically discusses the following two questions:First, what are the relationships between managerial incentives and frim R&D efficiency? Based on the previous studies, this paper examines the effects of compensation incentive and equity incentive on the firm R&D efficiency; then combining with businesses of firms, this paper researches the relationship between the combination of managerial incentives and firm R&D efficiency by mode selection and structure.Second, what are the relationships between financing constraints, managerial incentives and firm R&D efficiency? Given that financing constraints is the important factors in the process of firm R&D, it’s necessary to consider the influence of financing constraints on the relationships between managerial incentives and firm R&D efficiency. On the basis of previous studies, this paper introduces the financing constraints into the framework of managerial incentives and firm R&D efficiency, uses investment efficiency measure the degree of financing constraints, and tests the influences of financing constraints on compensation incentive, equity incentive and the combination of incentives by stochastic frontier analysis.In this paper, the main research conclusions are as follows:(1) Overall, compensation incentive has a significant positive effect on the firm R&D efficiency, namely that the more increases of compensation incentive, the higher firm R&D efficiency will be; there is a significant inverted U-shaped relationship between the equity incentive and frim R&D efficiency, namely that with the increases of equity incentive, the firm R&D efficiency will increase in the first stage, and then decrease.(2) The combination of managerial incentives has significant influence on the firm R&D efficiency. Specifically, in the mode selection of managerial incentives, the double mode can more effectively improve the firm R&D efficiency than the single mode; in the structure of managerial incentives, the greater proportion of return on equity in the total managerial compensation, the higher firm R&D efficiency will be.(3) Financing constraints have different influences on the relationships between managerial incentives and firm R&D efficiency. The financing constraints have a negative effect on the relationship between the compensation incentive and firm R&D efficiency, have a positive effect on the relationship between the equity incentive and firm R&D efficiency, have negative effect on the relationship between the structure and firm R&D, and have no effect on the relationship between the mode selection and firm R&D efficiency.In this paper, the main contributions are as follows:Firstly, this paper uses R&D efficiency which contains R&D input and R&D output informations to measure the level of firm’s R&D ability, can help to promote the existing researches from partial inspection to the overall inspection. In addition, using stochastic frontier analysis to measure R&D efficiency can reveal the relationships between the managerial incentives and R&D efficiency deeply, and give an effective way to understand the various levels of R&D efficiency between different firms and the related management reasons.Secondly, based on the study of the relationships between the compensation incentive, equity incentive and firm R&D efficiency, this paper discusses the influence of the combination of managerial incentives(including mode selection and structrue) on firm R&D efficiency, and then gets some useful conclusions, it can deepen recognition on the relationships between the managerial incentives and firm R&D activities in the existing researches.Finally, managerial incentives and financing constraints are the key factors to effect the firm R&D efficiency, this paper uses enterprise innovation theory, principal-agent theory and the theory of financing constraints comprehensively, then examines the relationships between financing constraints, managerial incentives and firm R&D efficiency, its results not only broaden the research field about financing constraints and R&D, but can also provide a reliable analysis framework and evidence on the managerial incentives for the firms under the background of different financing constraints.