The Research On The Impact Of Financial Connections On Private Firms' Innovation

The scientific and technical revolution and industrial transformation are profoundly changing the development pattern of the world.To win the initiative in a new round of global competition,China is undergoing a transformation from a manufacturing country to an innovation country.Private firms are important actors in promoting innovation.Stimulating the innovation vitality and innovation enthusiasm of private firms is the need to build an innovative country.Recently,multi-sectors are intensively introducing policies to encourage the development of private firms.Supporting the development of private firms is the national policy.Private firms' innovation is the key to the upgrade and development of private enterprises.Due to the confidentiality of innovation activities,private firms' innovation have high degree of information asymmetry.And the exist of credit rationing phenomenon in the market,private firms' innovation activities face more serious financing constraints.According to the theory of resource dependence,private firms will actively seek to establish relationships with financial institutions that own these resources in order to obtain financial resources.Social capital theory believes that increasing social capital can enhance the company's ability to access scarce resources.The establishment of financial connections is the way for private firms to seek resource dependence,and it is also a way for private firms to increase social capital.This paper is using a sample of 1123 private listed companies with A-share between2013 and 2017.Doing an empirical study on the impact of financial connections on private firms innovation.First of all,this paper examines the relationship between financial connections and private firms innovation.Secondly,further distinguishing the attributes of innovation,dividing firms innovation into high-quality innovation and low-quality innovation,and studying the difference between financial connections and different innovations.Thirdly,to distinguish the degree of influence of financial associations on private firms innovation under the market environment of different financial developmentlevels.Finally,the paper further studies the impact mechanism of financial associations on private firms innovation.The study found: Financial connections are promoting the improvement of private firms innovation level,and financial connections have a stronger boost to the high-quality innovation of private firms.In different financial development levels,financial connections are more effective in promoting private firms innovation in low-level financial development areas.The results of the mediating effect test of the impact mechanism indicate that the financial relationship in the financing path is partly through the financing constraint on the firms innovation,and the governance path is completely through the governance level to the firms innovation.The research in this paper broadens the research perspective of firms innovation,extends the economic benefits of financial connections,and refines the research on innovative corporate attributes.Finally,the paper combines the research conclusions to provide relevant policy recommendations for private firms innovation,which has enlightenment for the further innovation and development of private firms.