Banking Competition And Enterprise Innovation

Enterprise innovation plays an important role in enterprise development.The sustained growth of China's economic level not only needs to improve the manufacturing capabilities of enterprises,but also needs to rely more on new technologies and products.Enterprises are the main body of technological innovation.The technology level of a country depends largely on the innovation ability of enterprises.Innovation is one of the sources of core competitiveness of enterprises,and its importance to enterprises is self-evident.However,innovation itself has the characteristics of long cycle,high risk and information asymmetry,so it is particularly affected by financing constraints.China's financial system is dominated by banks.Banks are undoubtedly the core component of China's financial market.From a realistic point of view,bank loans are still one of the main ways for enterprises to obtain external financing.With the further development of the reform and opening-up policy in China,the reform of banking industry has promoted the opening of banking market,and the appearance of foreign banks has enriched the banking structure of China.The competition of banking industry is getting higher and higher.Based on the intensified banking competition,in order to study whether changes in banking competitiveness can promote enterprise innovation,this paper combines China Industrial Enterprise Database with the number of bank branches and uses the herfindahl-hirschman index(HHI index)to measure the competitiveness of the banking industry.This paper examines the non-linear relationship between the competitiveness of the banking industry and enterprise innovation at the micro level in 2008-2013 from the perspective of financing constraints.This paper analyses the causes and mechanisms of the non-linear changes,analyses different types of patents separately and makes a comparative analysis of different types of enterprises by different samples.The contribution of this paper is reflected in the following aspects: firstly,most literatures show that banking competition has a linear impact on enterprise innovation,that is,the higher the degree of banking competition is,the better the enterprise innovation is.However,this paper finds that the impact of banking competition on enterprise innovation is nonlinear and presenting U type.That is,when the competition degree of banking industry does not exceed a certain threshold,the increase of competition degree will inhibit the innovation of enterprises.When the competition degree of banking industry exceeds a certain threshold,the higher the competition degree,the better the innovation activities of enterprises.This conclusion adds important evidence for developing countries like China,and provides new empirical evidence and theoretical perspective for the optimization and adjustment of banking structure in China.Secondly,the existing literature generally uses the provincial panel data or only the data of listed companies for relevant research,but this paper uses the micro-enterprise level data of China Industrial Enterprise Database with large sample size and reliable results,which provides valuable supplementary evidence in this field.Thirdly,this paper conducts in-depth sample study on enterprises of different scales and profitability,and finds that banking competition has a significant U-shaped effect on enterprise innovation in different sample groups.When the degree of competition exceeds a certain threshold,banking competition has a more significant role in promoting small-scale enterprises and enterprises with weak profitability.Finally,based on the reality of China,this paper designs "HHI index of other cities in the same province" and "number of enterprises in the same city" as instrumental variables for endogenous testing,which can effectively control the endogenous problems among variables,then uses various methods to test the robustness of regression results.Based on China's actual situation,this paper deeply discusses the mechanism of banking competition affecting enterprise innovation and has certain inspiring value for the government to formulate corresponding policies and measures.In addition,enterprises can also use this paper to adjust investment decisions and promote the development of enterprises.Finally,this paper can provide reference for the reform of China's banking industry,encourage enterprises to innovate and invest in research and development and make China's economy grow rapidly and steadily under the impetus of technological progress.