Research On The Impact Of Equity Incentives On The Growth Of Innovative SMEs From The Perspective Of Enterprise Life Cycle

Under the background of the country’s vigorous promotion of the "double innovation" construction and the rapid development of emerging capital markets such as the NEEQ commonly known as the "New Third Board",small and medium-sized enterprises(referred to as SMEs below)have become an important group affecting the Chinese economy,and the New Third Board market has become an important platform for SMEs to raise funds and implement equity incentives.But at the same time,the data shows that the average life of SMEs in China is shorter than foreign SMEs,and the new third board listed companies have a high delisting rate.Therefore,studying how SMEs survive and develop is an important issue at present.In particular,innovative SMEs as new forces driving social development deserve more attention.The survival and development of innovative SMEs cannot be separated from the country.support of policies,capital injection and talent incentives.At the micro level,talent is especially important for innovative SMEs.As an important means of motivating talents,Equity incentive is also increasingly valued.The analysis of the implementation of equity incentive companies in the new third board makes us question the effect of equity incentive on innovative SMEs.Therefore,the research question of this article is made: Does equity incentive promote the growth of innovative SMEs? Will different equity incentive method affect the impact of equity incentive? Is there a best time to implement equity incentive? In the complex condition of rapid rise of the Sci-Tech innovation board and rapid change of the new third board,the entrepreneurs are facing the decision-making about equity incentives,and this article can provide a reference for management authorities to revise their policies and provide an advice for entrepreneurs to take decisions.Focusing on the research issues,1.Firstly,review the literature.This article reviews and collates the research on the causes of SMEs’ growth and the impact of equity incentive on SMEs’ growth;and finds that:(1)There are many factors that affect the growth of SMEs It needs to be controlled in empirical research;(2)About the impact of equity incentive on the growth of SMEs,the research conclusions are inconsistent.Therefore,this article introduces enterprise life cycle theory as a new perspective to study the equity incentive on the growth of innovative SMEs Through literature review and comparison,Dickinson’s cash flow method with higher sensitivity and better stability was selected to divide the enterprise life cycle stage,and the enterprise life cycle was divided into five stages: introduction period,growth period,mature period,elimination period,and recession period.2.Secondly,combine the actual situation.The research object of this article is innovative SMEs.By analyzing the characteristics of the new third board market and the features of the new third board listed companies implementing equity incentive,it explains the reasons for using the new third board listed companies as the representatives of the innovative SMEs,and introduces the capital market environment in which the research object is located,and further paves the way for theoretical analysis,model construction and control variable selection.3.Then,carry out research design and data collection.Based on the characteristics of the new third board listed companies and the characteristics of each enterprise life cycle stage,theoretical analysis and hypotheses were made,and a research model was constructed at the same time.1840 companies listed on the new third board from 2014 to 2017 were selected,and the data for the five years from 2014 to 2018 were used as a full-sample.136 companies that listed on the new third board and implement equity incentives from 2014 to 2017 were selected,and the data for the five years from 2014 to 2018 were used as a subsample.Stata15.1 software was used to perform the liner regression analysis on the research hypotheses.4.Finally,the following conclusions were obtained:(1)Equity incentives have a significant negative impact on the growth of innovative SMEs;the higher proportion of equity incentives,the worse growth;(2)Compared to stock options,restricted stocks can reduce the negative effects of equity incentives(3)Compared with other life cycle stages,the implementation of equity incentives during the introduction period will strengthen the negative effects of equity incentives;the implementation of equity incentives during the mature period will reduce the negative effects of equity incentive.5.At the end of the article,five suggestions corresponding to the research conclusions were made to be in order to inspire management authorities and entrepreneurs:(1)It is recommended that entrepreneurs take equity incentives cautiously;Due to the new third board market,The poor liquidity of stocks has greatly weakened the incentive of equity incentive,And before the implementation of equity incentive,a sound internal management system,adequate preliminary research,reasonable performance conditions and thorough work plans are required.Hidden costs are very high.The implementation of equity incentive is closely related to everyone’s interests.Once the control is not good,it will easily have negative effects on the normal production and operation,and have an adverse impact on the development of the company.If the implementation of equity incentive is necessary and the required conditions for the implementation of equity incentive are met after evaluation,it is best to choose to adopt restricted stock method during the mature period when the operation is relatively stable and the internal control system is relatively sound.The restricted stock method is adopted to maximize the positive incentive effect of equity incentives;(2)As a prerequisite and basis,the improvement of internal control system construction ensures the company’s stable development and the effectiveness of equity incentive;(3)Conducting sufficient prior research and balancing interests among different groups within the company,it can enhance employees’ fair perception;(4)Set reasonable performance conditions,maintain equity incentive plans to be just and reasonable,and ensure that incentive of equity incentive plan;(5)In order to help the development of innovative SMEs,authorities is called on to solve the issue about liquidity of stocks.The innovations of this article are mainly reflected in the following two aspects: Firstly,it focus on innovative small and medium-sized enterprises.For the research of equity incentives,previous scholars mostly focused on large-scale mature industry leaders represented by listed companies,and many research results of them show that equity incentives can promote the performance of companies.In today’s complex and severe living environment,innovative SMEs urgently need to learn from academic research results to guide and optimize their operations.This article focuses on innovative SMEs represented by the new third board listed companies,and the research results show that equity incentives have a significant negative impact on the growth of SMEs,because of the characteristics of the capital market where innovative SMEs are located,such as: investor restrictions and transaction method restrictions;and the characteristics of the innovative SMEs that are different from large mature enterprises,such as: weak internal control,strong subjective decision-making,very limited internal resources,etc.,.The research results of this article enrich the literature research on the effects of equity incentives.Secondly,Take the enterprise life cycle as a new perspective for researching the effects of equity incentives.The review of the literature reveals:(1)The research conclusions on the impact of equity incentives on the growth of SMEs are inconsistent;(2)Enterprise life cycle is a new perspective on the impact of equity incentives on the growth of SMEs,and few studies have combined the two.Therefore,this article introduces the perspective of enterprise life cycle to study the best time to implement equity incentives.The research results show that the implementation of equity incentive at different stage of enterprise life cycle has different impact of equity incentives on the growth of innovative SMEs,because that the number of companies,organizational structure,internal management,decision-making style,marketing,and cash flow characteristics are all different.at different stage of enterprise life cycle.The implementation of equity incentive during the introduction period can strengthen the negative impact of equity incentive on the growth of innovative SMEs,and the implementation of equity incentive during the mature period can reduce the negative impact of equity incentive on the growth of innovative SMEs.This article supplements the deficiencies of existing research.