Research On The Effect Of Financing Constraints On Firms' Innovation

Since China entered the new normal of economic growth,it has been difficult to provide sustainable and stable driving forces for economic growth relying on labor,capital and other factor-intensive inputs.The firms'innovation become a new source of economic growth.However,firms'innovation is a long process which faces high risks of failure,and the characteristics of information asymmetry and lack of collateral make it more susceptible to financing constraints.At present,China's financial structure is dominated by banking sectors.The bank credit,which is the main resource of firms' external financing,usually goes to state-owned firms that have implicit government guarantees.The financing needs of many non-state-owned firms have not been met which make them face financing constraints extensively.Therefore,the impact of financing constraints on innovation is worthy of attention.This paper analyzes the reasons for financing constraints affecting firms'innovation from the perspective of information asymmetry theory,the agency theory,and the pecking order theory.Based on the data of non-financial listed companies in the Shanghai and Shenzhen A-share from 2007 to 2017,this paper explores the relationship between financing constraints and firms'innovation by empirical analysis.In the empirical test,this paper re-estimates the KZ index to measure financing constraints and measures firms'innovation from the perspective of the number of patents applications,and explores the impact of financing constraints on firms'patent applications based on the negative binomial model.The regression results show that:Firstly,there is a significant negative relationship between financing constraints and the total number of patent applications.The more severe of the financing constraints,the fewer of the total number of patent applications.With considerations of different types of patent applications,this paper finds financing constraints have significantly inhibited firms' invention patent applications.Although the impacts of financing constraints on the utility model and design patents applications are negative,they are insignificant.Secondly,based on the intermediary effect model,this paper finds that R&D inputs has played an intermediary role in financing constraints affecting invention patent applications.Financing constrained firms have reduced invention patents applications by reducing R&D inputs.Thirdly,Financial development has played a moderation role in financing constraints affecting firms' patent applications.The regional banking sector's development has effectively alleviated the inhibition effect of financing constraints on firms' patent applications.Fourthly,in the discussions of firms' heterogeneity,this paper finds that financing constraints have significantly inhibited utility model applications of state-owned firms and invention patent applications of non-state-owned firms.Also,there are differences in the impact of financing constraints on innovation for firms in different industries.Financing constraints has significantly inhibited patent applications for firms in manufacturing industry,while the impact for firms in service industry is insignificant.Lastly,in the robustness test,this paper replaces the KZ index with the S A index to measure the degree of financing constraints and finds that the conclusions basically unchanged.