The Research On Boundary Effect Of The Influence Of Financial Development On Firms’ Innovation Investment

It’s of key importance to industrial structure upgrading, economics growth and avoidance of entering middle-income trap in China for strengthening the deciding function of market mechanism in resource allocation and promoting the financial capital flowing to firm innovation and technology advancement. However, the threshold exists in the influence of financial development with different connotation on economics growth, the key of the threshold is the boundary effect of the influence of financial development on micro subject-firms’ innovation investment behavior. Hence, grasping the core problem is important for insuring economic persistent growth and breaking though the middle-income trap in China.First, by constructing mathematical model to analyze the boundary mechanism of the influence of financial development on firms’innovation decision and innovation investment. According to the model of Philippe (2010) about the relationship between different investment category and economics volatility, introducing the influence of financial constraints on firms’innovation decision in the condition of financial market incompleted, we find that the entrepreneurs will substitude short-term investment for innovation investment when the financial development is beyond the effective boundary, showing that the firms decrease the innovation decision. Only if the financial development is within a certain boundary, the firms will takemore innovation decision; according to the endogenous economics growth model of Aghion (1998) including the influence of capital accumulation, introducing the influence of financial development on firms’ innovation investment level, we find that the financial sector can not allocate the capital into innovation firms with low cost when financial development is over the effective boundary, decrease the level of innovation investment. It will promote the firms’ innovation investment level when the financial development improves as the financial scale expands and financial efficiency improves. The proposition of financial development effective boundary makes up cognition shortage of the influential mechanism of financial development on micro subject-firms’ innovation investment behaviorSecond, by constructing financial function-deciding analysis framework of regional financial development convergence, using dynamic convergence model to explore the hierarchy and boundary characteristics of regional financial development in China. It presents the convergence characteristics of a high financial scale, financial efficiency and a match with the real economy in the East, showing the characteristics of a high hierarchy and boundary value. It only presents a financial scale convergence characteristic depending national policy supportation in the West, and eventually comes into the stage of adjusting structure and improving efficiency, showing the characteristics of a middle hierarchy and boundary value. It doesn’t present the convergence characteristics of financial scale and financial structure, meanwhile a poor match degree with economics structure and a divergence characteristics of financial efficiency, showing the characteristics of a low hierarchy and boundary value. It expands the limit of the research framework of financial development theory into financial scale and structure, ignores that the financial efficiency that reflects the financial function cognition is the fundamental deciding factor for financial development quality, and it has a higher conception for the analysis of regional financial development, modifies the misunderstanding of financial development only limited to scale expansion.Finally, by using three stage DEA-Malmquist, HECKIT model and threshold model to explore empirically the boundary of influence of the financial development on firms’ innovation decision and innovation investment. Once less than or more than the boundary value, financial scale will not promote the firms’ two stage innovation investment, only within a reasonable will it promote the firms’ two stage innovation investment significantly. The threshold value of the influence of financial scale on different ownership, industry and region firms is different, the influence of financial scale on firms’R&D investment is more from extensive margin but not from intensive margin; it doesn’t promote firms’ innovation investment stage significantly when the financial efficiency is in a low level, only more than a certan boundary value will it have a different influence on different firms’ innovation investment stage. It is more influential to state-owned enterprises and high- tech enterprises for financial technology progress and pure technology efficiency, while more influential to private enterprises and middle and low-tech enterprises for scale efficiency. Now the financial efficiency is low in China, appropriate financial scale boundary is the main driving force that promotes innovation investment in private enterprises and middle and low- tech enterprises; by using threshold model empirically finds that double thresholds and simple threshod exist in financial scale and financial efficiency respectively. As the persistent expansion in financial scale, the influence of a part of developed regions on firms’innovation investment gradually attenuates after it reaches the boundary value, therefore it becomes a pressing need for seeking the improvement in financial function. It provides theoretical support for the effective boundary of financial development and also the policy basis for emphasizing the core function of serving real economy, promoting technological progress and avoiding scale blindly expansion.