The Research Of Incentive Factors Of State-owned Enterprises’ Innovation And Insititution Design

How to incentive the state owned enterprises’(SOE) innovation is an unsolved problem. Ordinarily the enterprise can be survived in a competitive market when the intensity of R&D investment reach2%, and only can be competitive when the intensity reach5%. But when we collect the data from China’s capital market, we find that the average intensity of R&D in SOEs was only1.1%from2002-2009.The listed SOEs are the elites of the whole SOE group, so we can image the intensity of the SOEs will be even lower than1.1%. Since China has set the goal of building an innovation country, China is always trying to incentive the SOEs’ innovation with all kinds of methods. As our data shows that the average intensity of R&D subsidies was over57.89%in the SOEs, and the intensity will be even strong if we add the subsidy of tax policy and monetary policy. But the Chinese SOEs still lack of innovation. Does the government play a correct role in the incentive system? It’s quiet important for the country to reach its goal of building an innovation society.The paper studies the institutional environment which impact SOEs’innovation by both positive analysis and normative analysis, and also presents some suggestions on the policies of how to incentive the enthusiasm of SOEs’ innovation. After reviewing the main studies, we list the brief conclusions of this paper as follows:1. Based on the studies of the mechanism of how government intervenes impact the SOEs’ innovation, the paper finds that the government intervenes the SOEs through controlling the ownership and the assignment of the managers, and the purchasing of political achievements is deviate to the goal of SOEs’ innovation incentive. The positive studies show that:first, the stronger of the government intervenes, the less of the SOEs’ R&D intensity, which means the incentive effect is bad; secondly, the higher of the overstaffing in SOEs, the enthusiasm of SOEs’ innovation is less; the purchasing of GDP and employment rate is negative to the SOEs’ innovation. These results indicate that policy burden impact the enthusiasm of SOEs’ innovation.2. The paper studies the effect of public R&D subsidies on SOEs’ innovation, and the results indicate that:direct subsidies incentive central SOEs’innovation much better than local SOEs; indirect subsidies incentive local SOEs’ innovation effectively, which is coordinate to the fact that the policy burden produced the motivation of requiring subsidies from the government; and tax subsidy has no obvious effect on all kinds of SOEs.3.This paper examines the effect of executives’ incentives on SOEs’ innovation, the findings include:(1) the equity incentive has played an main effect to incentive the innovation in central SOEs, and the cash payment is still the first incentive in local SOEs, but the cash payment and equity incentive are both positive to the SOEs’ innovation, which may relative to the local government has deducted the R&D expenses from net profit to incentive innovation.(2) but when we add the factor of government intervene, the results show that:When the intervene is strong, the effect of incentive is worse. Which indicate that government intervenes will induce the effect of equity incentives.4. Based on the former analysis, the paper finds that government intervene is the fundamental factor which impact the SOEs’innovation, and the effect of government R&D subsidies and the equity incentive will be reduced of the government intervene. And the paper suggests some advices from government intervene, R&D subsidies policy and executive incentive.This paper makes some contributions to the literature in the following four dimensions.(1) This research fills the vacancy of previous study on outside insititutional environment:The SOE’s operation is higher influenced by the government,so the study result shows that reducing government intervene is the fundamental insitution to incentive SOE’s innovation,and other insitutional factors will be impact by government intervene too.(2)Based on the empirical testing of SOE’s individual data, this paper fills the vacancy of previous study only based on industry data, and the paper also proposes that the effection will be different among different kinds of SOEs, and the government should subsidize more reasonable.(3)This research studies how excutive’s incentive system impact innovation under government intervenes in central SOEs and local SOEs,and also provides some evidence for the government to formulate more reasonable compensation policy.(4)Based on the theoretical analysis and empirical analysis,the paper proposes insititutional arrangement from reducing government intervene,reasonable subsidize and executive’s incentive system to incentive SOE’s innovation.