The Influence Of Manager Overconfidence On Corporate R&D Intensity

Technological innovation is the core of the national economic growth driving force, is also the main source of firm competitiveness, mainly depends on corporate technology innovation level. Since innovation theory has been put forward by Schumpeter, scholars at home and abroad carried out extensive research into the influence on the factors of R&D investment from different angles such as firm internal features, management background, corporate governance, external environment and so on. In these studies, however, managers are usually assumed to be rational decision-makers, the irrational behavior, especially the overconfidence affecting the intensity of R&D investment is easily to be ignored. There is no doubt that as strategic decision-makers, firm managers’ irrational behavior influences firm’s R&D spending directly. Then, how will the features of overconfident managers impact corporate R&D investment? How will this impact influence the development of firm?Relaxing the assumption that managers are always rational, from the perspective of overconfident managers, this paper has studied the correlation of manager overconfidence and the intensity of corporate R&D investment according to the principal-agent theory, asymmetric information and the behavioral finance theory and so on. Then the paper analyzed whether will this relationship be affected by the industry, corporation growth and the ownership property, at the same time how will the overconfident managers affect the firm value through R&D investment has been discussed.Specifically, this paper mainly includes the following six parts:Chapter1:introduction. This part puts forward the research background, significance, purpose, research methods, framework, and the expected contribution of the paper.Chapter2:literature review. Literature review has divided into four parts, the first part summarized the influence factors of R&D investment; The second part mainly reviewed how manager overconfidence impacted firm financial decision-making; The third part is the summary of the impact of R&D investment on the firm value; The fourth part made a brief review on the research achievements of predecessors.Chapter3:the theory analysis of manager overconfidence influencing the firm R&D investment. This part has divided into three parts which are related concept, theoretical analysis and the theoretical path of manager overconfidence influencing firm R&D investment.Chapter4:the study design of the influence of manager overconfidence and the firm R&D investment.Chapter5:the empirical results and analysis. This section includes sample descriptive statistics, variable correlation analysis, regression analysis and robustness testing.Chapter6:research conclusion and revelation. This part concludes the whole research firstly. After that, it shows clearly the possible fields of research in manager confidence and corporate R&D activities in future.In this paper, the analysis results shows that the manager overconfidence is significantly positively related to the intensity of R&D investment, as overconfident managers can promote firm’s R&D investment. At the same time, the industry, corporation growth and the ownership property have significant impact on the relationship between manager overconfidence and the intensity of R&D investment. In specific, this remarkable positive correlation only exists in the new and high-tech firms, high growth firms and non-state-owned firms; And the correlation is not obvious in non-high-tech firms, low growth firms and state-owned firms. In addition, in high growth companies, overconfident managers strengthen the positive influence of firm R&D investment on firm value through seizing the growth opportunities. Namely the overconfident managers enhance the firms’ independent innovation ability by promoting R&D investment and do good to long-term development of the firms.The main contribution of the paper includes three parts. First of all, this paper has provided a relatively new perspective for the analysis of technology innovation motivation in firms by studying how will manager overconfidence impact firm R&D investment and firm value. Meanwhile, this research holds that manager confidence is an important factor to influence firm R&D investment and it is different under different circumstances, which provide a reference of manager selection. What’s more, based on the realistic background of our country, the paper confirmed the applicability of the behavioral finance theory in the domestic and enrich the research of behavioral finance in China. Due to limitation of time and academic aptitude, this dissertation still needs improvement in some ways. For example, further cases and examples should be studied to reach a more comprehensive and representative conclusion.