Security Interest System Reform,Financial Constraints And Firm's Innovation

In January 2019,the State Intellectual Property Office(SIPO)held a press conference to announce the relevant statistics of patents and trademarks in 2018.According to the SIPO data,1.542 million invention patents were filed in 2018,with a year-on-year growth of 11.58%.The rapid increase of patent applications reflects the continuous enhancement of China's innovation capability.In 2018,a total of 432,000 invention patents were granted,grew by 2.86% over the same period of the previous year.However,only Huawei,OPPO,Lenovo and Tencent are not state-owned enterprises in the top 10 authorized number enterprises,and these four enterprises belong to the Internet industry,but not manufacturing enterprises.The weak innovation ability of private enterprises is mainly due to their large financing constraints.The data show that private enterprises only get 25% of the bank loans,which is far lower than their 60% GDP contribution rate and 80% of the employment posts.The private enterprises are finding it's difficult and costly to obtain financing.Under this background,how to alleviate the financing constraints and effectively enhance the innovation ability of private enterprises to promote high-quality economic development has become a society concern.Based on the Natural Experiment of Property Law Enactment in China,this paper considers how firms' innovation activities respond to the ease of financing constraints caused by the Property Law enactment in China in 2007 with a sample of manufacturing private enterprises listed on the A-share market between 2003 and 2009,by using the Tobit model and the Difference-in-Difference method.We take the number of patent applications(including invention patents,non-invention patents and total patents)as the measure of enterprise innovation number.And we use the proportion of invention patent applications,the proportion of invention patent authorization and the proportion of non-invention patents as the measure of enterprises' innovations quality.Empirical results show that after the enactment of the security interest reform which aims to alleviate the financing constraints of enterprises,the innovation capability of enterprises has been significantly improved.Specifically,compared with the control group enterprises,the number of applications for various patents of the experimental group enterprises has increased significantly after the enactment of the Property Law.Furthermore,the proportion of invention patents applications of the experimental group enterprises,the invention patent authorization rate and the non-invention patent authorization rate have also improved significantly after the Property Law.The empirical evidence in this paper indicates that the Property Law allows enterprises to mortgage with liquidity assets,which enhances the space and incentives for corporate debt financing.And that will ease the constraints of corporate financing,and promote R&D expenditures or R&D efficiency,thus enhancing corporate innovation ability.By using the external impact on enterprise financing environment imposed by the Property Law and Difference in Difference method,this paper clearly identifies the causal relationship between legal changes and corporate innovation.This not only enhances our understanding of the mechanism of legal influence on the enterprise's innovation,which is useful supplement to the literature on "law and enterprise innovation",but also is illuminating to solve the current problem of lack of innovation in private enterprises due to financing constraints.