Research On China's Listed Companies' R&d Intensity And Its Economic Consequences Based On Political Relations

January 9,2006, the CPC Central Committee General Secretary and State President and CMC Chairman Hu Jintao, deployed "National long-term Science and Technology Development Plan (2006-2020)" in the National Science and Technology Conference, which sounded the horn in the progress of building China into an innovation-oriented country. Scientific and technological innovation is the main event in the nation-building. Studies have shown that technology has become the decisive factor in measuring comprehensive national strength. R&D investment, which means a strong guarantee for long-term advantages, is an important symbol in measuring business innovation capability and potential development. Related data have shown that R&D expenditures account for 4%-8% of sales in general; high-tech enterprises are as high as 15% or more in American and Japanese corporation. R&D has become a huge driving force in promoting the economic development in western countries. Facing with a grave economic situation, Chinese enterprises can keep coordinated and sustainable development only through the strong promotion of technological innovation. It has become an extremely important activity to create value and enhance the survivability.At the same time, China has a different background and a special political system comparing to Western developed countries and other transition economies. Just considering the issues, analyzing problems, solving problems from a simple micro-level, is obviously not enough. Political factors which could influence business decision-making should be paid particular attention, that is, senior management personnel in political relations. As Faccio (2006) pointed out that "political relations" existed in company is a universal phenomenon, political relation research has become a hot academic research and key problem.Some of China's listed companies are restructured from state-owned enterprises. Many of the company's senior management personnel, such as the chairman and general manager-level board members, are appointed by the government or controlled by state-owned shareholder, with some political background. Non-state enterprises due to the lack of "innate" superiority, seek an alternative mechanism through the establishment of political relations with the government to protect business interests. Studies have shown that companies have an incentive to use its close ties with the government to protect its property rights against infringements (Johnson, McMillan and Woodruff,2002).In addition, the sufficient accounting information and its disclosure norms provide an opportunity for this study. Based on the company's political relations perspective, this paper has explored the company's investment in R&D intensity and its economic consequences, confirmed that the political relation has indeed played a decisive role among the investment behavior and corporate performance. The author found that:(1) In state-owned high-tech enterprises, between political relations and corporate R&D intensity, there is a significant positive correlation; In the non-state high-tech enterprises, their correlation is not significant.(2) In the state-owned high-tech enterprises, corporate R&D intensity has no effect on the performance of the company; but in the non-state high-tech enterprises, corporate R&D intensity enhances performance of the company. The above study confirms that the company's political relations have indeed played a role in promoting the R&D investment behavior, however, results of operations of economic subjects, depend on the properties of the ultimate controller.Closely linked to the current system, this paper starts from the R&D acts, analyzes and demonstrates the relationship among the company's political relations, corporate R&D intensity and company performance. This study results show that the political relation has played a generally promoting role in investment behavior, particularly in state-owned high-tech enterprises. This is consistent with the truth in our country at this stage.Recommendations are as follows:In the system construction, China should strengthen the building of relevant institutions, improving the support for enterprises and guiding the company in accordance with normal procedures as much as possible.In enterprise, it is wise to make targeted policy options and appropriate arrangement, but the real magic everlasting should focus on its core competitive advantage.In investment, the investor should analyze from the external environment and internal business contacts and make further distinguish.This paper helps us study from a new, broader perspective on corporate R&D investment behavior, which explores the back factors behind corporate R&D intensity and promotes investors to fully understand the corporate R&D investment. In short, this paper's research has important theoretical value and profound practical significance.