Research On The Driving Factors Of Firm R&D Investment And Their Effect Based On Behavioral Agency Model

Scholars have explored the effect and driving factors which affect firm R&D investment from internal aspects and external aspects. Internal factors include operating conditions, corporate governance, Equity structure, etc. External factors include industry characteristics, market structure, policy, etc. Among the factors, performance is concerned as a driving factor of R&D investment based on Behavioral Theory of the Firm, and corporate governance factors which ease or solve agency conflict between shareholders and executives provide long-term security mechanism for R&D investment. This paper try to combine these two kinds of factors, which previous studies seldom did, in order to provide a reasonable explanation for driving factors of firm R&D investment and a reference of the optimization design of corporate governance mechanism for China’ listed company.This paper is based on Behavioral Agency Model and treats executives’ risk bearing as source of the behavioral effect of driving factors of R&D investment. Our research takes 2007-2013 Chinese listed enterprises as samples and makes hypothesis on basis of theoretical analysis. Empirical study is based on multiple regression models which are used to test independent effect and interaction effect of performance valuation factor and corporate governance factors on R&D investment. The same testing method is also used for high-tech subsamples and non-high-tech subsamples. Fixed effect model and propensity score matching method are used in empirical study. Our research shows that:(1) Attainment discrepancy intensifies executives’ conservative behavior instead of improving firm R&D investment.(2) Managerial incentives have a positive effect on firm R&D investment.(3) Attainment discrepancy has a significant negative interaction effect with money compensation and a significant positive interaction effect with stock ownership.(4) CEO Duality has a significant negative effect on R&D in high-tech subsamples and also has a significant negative interaction effect with attainment discrepancy on R&D in all the samples.(5) The managerial incentive mechanism on R&D investment is more significant in high-tech subsamples.This paper argues that the method to encourage executives to invest in R&D includes: First, Various managerial incentives methods like stock option and virtual equity can be used, and the measurement can be used to design executive compensation system, such as performance, firm value, R&D output, etc. Second, improve the situation of CEO duality and supervision mechanism provides security for R&D activities, such as independent director, board of supervision, etc. Such methods accelerate the upgrade of Chinese listed enterprises and improve their market competitiveness.