The Empirical Analysis Of The Impact Of Financial Development On Technological Innovation In China

The current research about financial development's effect on innovation is mostly based on the developed countries,the role of our reference is not strong.In the face of the complex economic environment in China,a simple imitation of the financial development mode of developed countries may be astray.Therefore,the purpose of this paper is to study the actual situation of our country and different regions,so as to provide some useful suggestions for financial development and financial support for the smooth implementation of China's innovation-driven strategy.From the perspective of the direct effect of financial development on technological innovation,financial development does play a catalytic role in technological innovation.But,different dimensions of financial development on the role of the technological innovation in our country is different.Among them,the financial liberalization has significant positive role in promoting technological innovation in China,but the financial deepening only has a weak positive effect.This result is due to the serious problems in China's financial system,China's financial system is mainly dominated by state-owned banks.A large number of small and medium-sized enterprises are difficult to obtain financial support form the state-owned bank,and a large number of state-owned bank funds flow into state-owned enterprises,with relatively low level of innovation.Therefore,even if the degree of financial deepening is increasing,the flow of state-owned bank funds to provide still did not change much.So,the role of many small and medium private enterprises imitating innovation is limited,which also explains why the financial deepening only played a weak role in promoting technological innovation.But the financial broadening is different,financial broadening means that the channels provided by the funds become more convenient.For example,the increase of different types of financial institutions,including private banks,bond financing and other channels,upgrading financial the broadening degree,will give a large number of opportunities to small and medium private enterprises.Therefore,it will play a significant positive role in promoting technological innovation.The empirical results of different regions indicate that the financial liberalization has obvious positive effect on the technological innovation of the eastern and midwestern regions.However,the promotion effect to the east is greater than that of the midwestern regions.in the eastern region,the technological innovation has played a positive role in promoting,but it did not pass the correlation test in Central and Westernregions.As the industry level of empirical test,different types of industries in technological innovation reacted differently in the financial development.The empirical results show that on external financing the securities market has a greater impetus to the innovation of the external financing,but the banking sector has little effect on the industry innovation with high dependence.The main reason of this result lies in the problem of our banking system.China's banking system is mainly monopolized by the four state-owned banks.In terms of funding,a lot of money mainly goes to the government and state-owned enterprise sectors.In fact,in terms of innovation,a large number of small and medium enterprises are the main force,and it is these companies that need external funding support badly.But it is difficult for them to obtain fund in the bank.Compared to banks,the possibility of financing through the capital market is greater.In addition,as for the development of high-tech intensive industries,credit market plays a more significant role,while the securities market does not play an important role.In fact,the emergence of this result and the main reason is related to the China's innovation model.Among China's technological innovation enterprises,a large number of enterprises are imitative innovation based.The greatest difference between imitative innovation and original innovation is the risks to be taken are different.The uncertainty of the original innovation is greater,and the original innovation is more complex in technology.Therefore,the stock market is more appropriate for enterprises which are doing original innovation.The views of the participants in the stock market are inconsistent,and the relationship between the operators is competitive rather than coordinated.In short,the stock market can express information about individual investors.This situation is undoubtedly more effective in dealing with technological innovation and for emerging industries.This is because when the new technology has just appeared,relevant information in the market is little,and there are many different points of view.While the people in stock market can be directly involved in decision-making,and invest and divest according to the information obtained.Finally,the market can slowly accumulate enough experience and information.But Chinese enterprises are mainly carrying on imitative innovation which has high certainty.Therefore,the involvement of bank funds may be more effective.This paper also studies the threshold effect of China's financial development on technological innovation.Through theoretical analysis and empirical test,we find that in the process of financial development promoting technological innovation,there are threshold effects of three variables:(1)institutional environment threshold effect.The institution is important because if there is a big institutional shortcoming,it will lead to money supply distortions along with the financial development.For example,some companies can obtain credit through bribery due to regulatory defects,some companies can be listed through “packaging”,and funds mayexcessively flow to the virtual economy due to institutional reasons,and so on.All these institutional defects can hinder the effect of financial development on technological innovation.(2)There is a threshold effect of digestion and absorption capacity.Because China's technology development process is very different from Western developed countries'.The first step of Western technology development process is knowledge creation,scientific research and development.Then the knowledge transforms into technology,which led to technological progress.Or,the technological progress of the West mainly relies on the endogenous power.It's through own knowledge to create a step by step to the technical update and upgrade.However,the origin of China's technological progress is from the beginning of learning from Western enterprises,through the "dry school" continuous access to technology,and on this basis to imitate innovation.And the premise of Simulating innovation is the ability to absorb.if the existing technology can not understand,it is naturally not innovation and upgrading,therefore,from this perspective,China's financial development in order to have a more significant effect on technological innovation,it must be achieve a certain absorption capacity.(3)There is a threshold effect of foreign direct investment.In the process of technological progress and technological innovation,the technology spillover of foreign-funded enterprises has played an important role.However,the early entry into China's foreign-invested enterprises to labor-intensive enterprises,foreign investment is relatively low quality.With the development of China's economy and the continuous upgrading of industrial structure,the quality of foreign-funded enterprises has gradually increased,especially in the eastern coastal areas,the number of knowledge-intensive foreign-funded enterprises more and more.Therefore,because of this special way of technological progress in China,making the number and quality of foreign investment enterprises also require a certain threshold effect.This paper also divides technological innovation into original innovation and Simulating innovation according to the difference of innovation mode.This paper also examines the impact of China's financial development on different types of technological innovation.The empirical results of this paper show that,in the present stage of our country,the financial liberalization plays a positive role in promoting the original innovation and Simulating innovation.But the effect of financial deepening on the original innovation has not passed the significant test,and also has a certain role in promoting of Simulating innovation,but it's small.This result may be related to China's financial development imbalance.According to the theory of financial development,financial deepening mainly refers to the increase in the number of financial assets,and in China,this is mainly reflected in the financial institutions to provide loans to the whole society to support enterprises.However,for the four state-owned banks occupy a dominant position in banking field,and most of the loans from these four banks transfer into thestate-owned enterprises which have the low innovation efficiency and less original innovation,so even if the degree of financial deepening increased,the direction of capital inflows will not change.Thus,from a national perspective,the financial deepening did not play a due role in promoting the original innovation.On the other hand,the improvement of financial liberalization means that there can be more capital supply channels,for example,the establishment of some private financial institutions,they take a more market-oriented mode of operation,therefore,they can provide financial support to some private enterprises which are expert to original innovation,and similar to the financial development of venture capital class will have more direct impact on technological innovation to promote the role.Finally,this paper makes an empirical test on the relationship between financial development and technological innovation efficiency.The empirical results show that the financial development has a significant positive effect on the efficiency of technological innovation in the eastern and central regions of China.However,the role of financial development in technological innovation is not significant in the western region.