Research On Firm’s Heterogeneous Investment Behaviour And Export Preference Under Credit Constraints

The motivation of firm’s export is wildly explored in the filed of international trade. Recent literature is mainly focused on firm’s heterogeneity. This paper discussed the heterogeneity of firm’s investment behavior. Based on the background of undeveloped financial market in China, we introduced credit constraints into the analytic framework of firm’s investment and export behavior. Enterprises in China lack the incentive to take R&D investment and exhibit a strong export preference. This paper tries to explain this phenomenon from a perspective of credit constraints caused by undeveloped financial market.First of all, based on the analysis of the firm’s heterogeneous investment behaviour under credit constraints, this paper extended the mathematical model constructed by Philippe Agion(2011). We defined two kinds of investment including short-term investment and long-tern productivity enhancing investment. By solving this mathematical model, we get the following conclusions. Under the undeveloped financial market, innovative enterprises face severe credit constraints. Credit constraints improve the risk for R&D investment. Consequently, firms are tending to allocated more capital to short-tern investment, rather than R&D investment. In an open economy, firms in a strongly credit constrained country will specialize in manufacturing, which leads to export expansion. Secondly, Using approximately300thousand industrial enterprises in China from2005to2007, we analyzed the distribution features of the R&D investment and export. Employing Tobit models by dividing our sample into several groups, empirical analysis brought the following conclusions. Small, new established and private firms face more severe credit constraints. Credit constraints reduce firm’s incentive to take R&D investment. Firms facing credit constraints are tending to specialize in manufacturing, which leads to export expansion. At last, we propose some policy suggestions including furthering the marketization reform of the financial market, enforcing the diversification of financial structure, and regulating private landing market.