The Influence Of Financial Structure On National Innovative Capacity

This paper focused on the influence of financial structure on the national innovation capacity.Chinese government made the strategic deployment to strengthen the supply-side structural reform in 2015,and innovation was determined one of the five core concepts for development during China's Thirteenth five-year plan.To promote the supply-side structural reform,capital and innovation are the two elements of great potential from the supply side.And the capital is also an important factor for innovation from the supply side.To promote innovation through financial reform,will play greater leverage effect,and promote the supply-side structural reform to accelerate and achieve better results.Based on the above background,combining the two supply-side factors together-innovation and capital,to test the influence of financial structure on the national innovation capacity from the supply side through theoretical model and empirical analysis,is of great theoretical and practical significance to accelerate China's supply-side structural reform.Firstly,this paper established a micro-economic theory model,in which an innovative enterprise chose debt financing or equity financing for project financing to achieve profits eventually,and analyzed the impact mechanism of different financial structure on innovation.The theoretic modeling showed that both equity financing and debt financing are conducive to promote innovation.However,due to the different risk and benefit sharing mechanism,equity financing and debt financing were applicable to different types of innovative enterprises,so as to lead the potential difference in their influence on innovation.Concretely,equity financing was more applicable to innovative program generating reasonable profit;debt financing was more applicable to those of low risk,or those generating excess profit.Based on the theoretical analysis,this paper focused on the major 99 global areas covering the period form the year 1989 to 2012,and empirically tested the impact of financial structure on innovation.The empirical results exhibited:1.Overall,both stock market and credit market could promote the national innovation capacity without statistically significant difference,and historical capital also contributed to the promotion of national innovation capacity.2.The influence of credit market on innovation was more significant than stock market in those more innovative areas,showing that there existed a 'difference effect' between stock market and credit market in the promotion of innovation under certain conditions.3.The influence of financial structure on innovation was more significant in those less innovative areas,showing that there existed a 'substitution effect' between the sound financial system and knowledge and technical reserves for innovation.4.The structural equation modeling also showed that the promotion of national innovation capacity contributed to the expansion of financial service and the structural change of financial system,exhibiting that national innovation capacity adversely affected the financial structure,although this effect was not immediate.5.There existed a "Matthew effect" in the development process of national innovation capacity.In those more innovative areas,with other conditions remaining unchanged,their future innovation capacity would be stronger correspondingly.In addition,this paper conducted a comparative study on global financial structure and innovation capacity by country(area).The results revealed that there did not exist the optimal financial structure suitable for all countries or areas,indicating that Modigliani&Miller theory applies not only to corporate capital structure at micro level,but also to national financial structure at the macro level.Meanwhile,global innovation capacity exhibited significant income effetct,inter-district and intra-district effect;significantly positive correlation between innovation input and output was also documented except in low income economies.In summary,this paper found that financial structure and national innovation capacity interact with each other,and establishes the link between the two supply-side factors-capital and innovation,which was of great theoretical and practical significance:(1)this paper provided a new explanation for how the financial structure affects national innovation capacity from the micro-economy perspective,which lays a foundation for the subsequent research;(2)the much wider research sample,relatively long time span,the systematic usage of massive empirical test methods,and abundant robustness tests,ensured the robustness of the conclusions of the empirical research all together,so that existing related emiprical research was effectively supplemented and improved;(3)the significant interaction inspired us to make more efforts on the capital and innovation aspects when facing the limited incremental on the labor and land aspects at present,so as to leverage the interacting effect between capital and innovation,accelerate China's supply-side structural reforms and achieve tangible results,as well as the promotion of national innovation capacity;(4)both stock market and credit market could promote the national innovation capacity without statistically significant with parallel,indicating that China should accelerate the development of stock market and credit market equally in deepening the reform of the financial system;(5)the results implied that we must proceed from the actual situation of China's economic and social development when deepening the reform of China's financial system and improving the financial system,and absolutely do not apply abroad experience such as 'circuit breakers' in stock market mechanically;(6)we should not blindly increase investment in promoting"Public Entrepreneurship,Peoples' Innovation",and but to strengthen the protection of intellectual property rights and other aspects so as to further create the overall more conducive environment for innovation simultaneously,striving to more outputs for unit investment in innovation.Finally,based on the theoretical modeling and empirical analysis,this paper creatively put forward policy proposal on how to enhance the national innovation capacity in China through the reform of the financial system from the supply side,such as the implementation of directional tax abatement according to the financial service supplied to innovation field,the implementation of differential deposit reserve rate and reloan policy based on the banks'credit supplied to innovative enterprises,and etc.And we aim to provide decision-making reference for national authority on accelerating the supply-side structural reform and "Public Entrepreneurship,Peoples' Innovation" strategy implementation so as to achieve better results.