A Research On Financing Policy Of Small Technology-based Firms In China

Since the 1990s, the science-technology small-medium enterprise have drawn more and more attention from all over the world, which owns a lot to their unparalleled advantages compared with the other enterprises, especially in the aspects of their innovative mechanism and its effects. For example, these science-technology small-medium enterprises require less investment; have flexible decision mechanism and small cost in management, capable to adjust themselves to variant needs from the markets. These science-technology small-medium enterprises take the role of the effective carriers who can speed up the transform of the scientific and technological achievement and the realization of technological innovation. What's more, they are the crucial source of the growth of national economy. The development in recent years has indicated that they have composed the key part and a new increasing point of our national economy, no matter in terms of their numbers or products quality. It is even assessed that the small-medium enterprise have born arduous national mission to some extent since their beginning. One of the toughest problems confronted by small-medium enterprise is large quantities of investment in great need. However, they can hardly get sufficient fund via traditional financing. Therefore, the government's forceful involvement and strong impel undoubtedly become their key strength for their development before the complete acceptance by the market.Innumerous essays concerned of the financing of small-medium enterprise as there are nowadays; comparably few are focused only on the matter of such financing and even less form the government perspective. From the government perspective the paper has referred to three questions: the characteristics of the financing of science-technology small-medium enterprise and their current difficult position; the interpretation of the cause and effect of the predicament of science-technology small-medium enterprise; the tactics of helping them out of their dilemma, especially the crucial role of the government in such a process. Based on the theory of Economics of Regulation,combined with the theory of Credit Rationing Theory, Industrial Clustering Theory, and New Industries and Technologies Financing Model introduced by Allen and Gale in 1999, the paper mainly discusses the function of the government in the financing of science-technology small-medium enterprise during the course of the Transitional government function.The whole paper falls into four parts within six chapters.Chapter 1 introduces, from the government perspective, the theoretical foundation of the policy of the financing in science-technology small-medium enterprise: Economics of Regulation, which is the latest theoretical achievement in studying government's function. The importance of helping science-technology small-medium enterprise by the government has been first analyzed. After detailed literal review of the Economics of Regulation, the interpretation of the function of the government in market-oriented economy has been analyzed. The Western theories of Economics of Regulation are mostly available for mature market-oriented economical system with little research on the difference between the government's function in the time of transformation and that in the mature market. It is this difference that we have managed to generalize, applying the basic relative principles in Economics of Regulation to the reality of our economic system revolution. Furthermore, it is pointed out that the state should not only make up for the dysfunction of the market, but commit the mission of bearing the market at the very beginning. The most important is that this kind of function of government never implies that our government can take away from disobeying the economic development regulation. On the contrary, the government in our country must cultivate the market since it came into being; and give way to the market when it becomes mature. Based on the above, the paper has analyzed at large the government's function in fostering the financial market, concerning the theories of Credit Rationing Theory, Industrial Clustering Theory, and New Industries and Technologies Financing Model introduced by Allen and Gale in 1999. A framework of the financing of the science-technology small-medium enterprise has been introduced in this chapter.Chapter 2 launches the questions and analyzes the difficult condition of the medium-sized and small enterprises empirically."Chengdu science and technology enterprise financing condition questionnaire"is carried on to get first-class materials by Developing and Planning Bureau and Financing and Guaranteeing Office of Chengdu Hi-Tech Zone, upon which the general characteristics, capital demands features, financing problems and financing system states are investigated empirically in chapter 2.Chapter 3 and 4 is belong to the part of problem analysis through theoretic and empirical analysis to investigate the financing problems of science-technology small-medium enterprise。Theory explanation is provided in chapter 3 from Credit Rationing theory, industrial clustering theory, and New Industries and Technologies Financing model introduced by Allen and Gale in 1999. In chapter 4, based on the case studies of domestic and abroad successful financing of science-technology small-medium enterprise and comparative studies among global financing states of science-technology small-medium enterprise, the main policies and measures are summed internationally and main shortages are presented domesticly.Chapter 5 and 6 is belong to the part of strategy research。Based on the analysis of life cycle and financing strategy of science-technology small-medium enterprise, a trapezoid financing model is presented initially in chapter 5 and government role is emphasized in the model by constructed supporting financing system to fostering science-technology small-medium enterprise. Finally, government strategy is brought forth in chapter 6 in order to settle domestic financing problems of science-technology small-medium enterprise based on the above theoretic and empirical analysis. Main content of government strategy contain issuing tax policy, promoting capital liquidity, fostering industrial clustering, improving government subsidy and innovating land financing pattern in order to facilitate science-technology small-medium enterprise developmentThe first possible innovation of this paper is the angle of view of financing research. In the context of domestic literature, the main contribution of Economics of Regulation is limited to the analysis of the role of government in developed market economics, but still open to Chinese transition economy. Based on the theory of Economics of Regulation and focus on the role of government role in transforming economics, the special function of finance market fostering is analyzed in this paper by aiming at Transitional government as the angle of view. Based on the empirical analysis of those characteristics of financing states and comparative study on international financing policies of science-technology small-medium enterprises, a strategic choosing by government is presented in this paper. The second possible innovation is"trapezoid financing model"for science-technology small-medium enterprises presented in this paper initially. Based on investigating the basic characteristics and financing principle of science-technology small-medium enterprises in different stages in colloquia and questionnaire way, a case study is carried on, taking Chengdu Hi-Tech Zone as am example, to investigate the basic characteristics, financing demands, supply system and financing state of science-technology small-medium enterprises. The third possible innovation is introducing the concept of financing gap, which is used to analyze the underlying reasons on the dilemma of science-technology small-medium enterprises financing with the theories of Credit Rationing Theory, Industrial Clustering Theory, and New Industries and Technologies Financing Model, on the background of government's powerful role and Hi-Tech industrial clustering. Reasonable financing system of science-technology small-medium enterprise is constructed, and the interrelationship among capital liquidity, industrial clustering and Hi-Tech enterprise financing is investigated simultaneously, then the different roles of government, enterprise, and agency in the science-technology small-medium enterprise financing system are brought forth.The main limitation of this paper is lacking of rigid empirical analysis of enterprise financing using economics model but just using colloquia and questionnaire method to get research materials, because of lacking of real financial data of companies due to their security consideration. Another shortage is lacking of deep research on function borderline between market and government in enterprise financing. Is market dominating or government? Is government dominating firstly, then market doing, or together? A novel government-oriented financing model cannot be constructed in this paper, although it is expected to be the first contribution that author hope to contribute to in this paper.