Innovation Investment Smoothing Mechanism Of Working Capital And Its Monopoly Effect

As the manufacturing industry transitions from “manufacturing economy” to “innovation economy”,innovation activities have become the internal driving force for expanding monopoly power.However,the high risk and cost of innovation activities still rely on internal financing,which is stronger for the demand of internal funds.How to ensure the continuous innovation investment and continuous competitive advantage through the management of internal liquidity when facing the impact of cash flow is particularly important.We discuss how non-cash working capital management can smooth innovation investment.We divides innovation investment into research stage and development stage and innovation investment smoothing effect changes with the enterprise life cycle,and the innovation investment smoothing affects the formation of the monopoly power.Using the data of China's manufacturing listed companies from 2007 to 2016,Based on Tobin'Q investment model,we build the model of working capital investment,research stage and development stage investment to verify innovation smoothing mechanism with measuring investment cash flow sensitivity for further verification.we build monopoly power model to test the impact of innovation investment smoothing on monopoly power.Using the GMM estimation method,the following conclusions are drawn: First,when the working capital level is high,the smoothing effect in the development investment is better than the research investment.Second,for the growth enterprises,the smoothing effect of working capital on investment in the development stage is better than the research stage.For the mature enterprises,the smoothing effect is only in the research stage investment.For the recession enterprises,the smoothing is only in the development stage investment.Third,the smoothing effect helps the formation of monopoly power of enterprises,the hysteresis effect of the research stage investment smoothing is more pronounced.Fourth,for the growth enterprise,they expand the monopoly power through the development stage investment smoothing,and the mature enterprises in the research stage investment smoothing.The research enriches the innovation financing theory from the perspective of heterogeneity and enterprise life cycle,and improve the new vision to expand monopoly power.