Entrepreneurial Reputation’s Influence On The Long-term Performance Of Corporate Research And Development Investment

Companies must increase their investment in research and development if they want torealize technological creation. However, our country’s investment in research anddevelopment is not enough compared to that of the developed countries. Because of this,government has to provide fund for corporate research and development to promotetechnological creation. In the process, there are lots of problems such as incompleteinformation or market, being slow to the market signal, poor efficiency. So many companiesdon’t estimate investment risk prudently and abuse fund of research and development.Building entrepreneurial reputation needs long-term efforts and depends onentrepreneurs’ past behavior and morality. In the consideration of equity characteristics andlegal binding, this paper empirically studies the influence on the performance of corporateresearch and development investment by entrepreneurial reputation based on the theories ofreputation, modern property, institution of legal binding and commission-agency. For the dataneeded, I collected them from A share of Shanghai and Shenzhen stock market from2007to2009provided by Juyuan database. Through research, I come to the conclusions as follows:(1)when there is no differentiation of the characteristics of equity, entrepreneurial reputation haspositive influence on the performance of corporate research and development investment.That means reputation motivation can make up for the weakness of dominant incentivecontract, promoting entrepreneurs to make decisions from the perspective of long-terminterests and completing research and development task diligently. So the long-termperformance of research and development investment can be improved.(2) When there isdifferentiation of the characteristics of equity, entrepreneurial reputation of bothnon-state-owned and state-owned companies can promote the improvement of long-termperformance of corporate research and development investment. However, in comparison tothe non-state-owned companies, the positive influence is weaker for the state-ownedcompanies. From this, we can see that reputation motivation of state-owned companies isweaker than that of non-state-owned companies. Entrepreneurs of state-owned companiesshould be selected by market so that they can be motivated to complete the research anddevelopment task more diligently and the long-term performance of research and development investment can be improved more.(3) when there is no differentiation of thecharacteristics of equity, as the extent of legal binding goes deep, the positive influence on thelong-term performance of research and development investment imposed by entrepreneurialreputation becomes weak. That means legal punishment can compensate for theentrepreneurial reputation in restraining entrepreneurs’ opportunistic behaviors.(4) Whenthere is differentiation of the characteristics of equity, the positive effect becomes weaker forboth non-state-owned and state-owned companies.This study can give us enlightenment in making policies. If we can build entrepreneurialreputation system and punish those abusing government funds for research and developmentinvestment by law strictly, decision-making level of investment in research and developmentwill be improved. By this, technological creation will be realized and long-term performanceof research and development investment will be maximized. Besides, our government canhave some referential data to provide funds for corporate research and developmentinvestment.