Study On Relationship Between Banking Competition And Enterprise Innovation From The Perspective Of Business Cycle

Innovation is the fundamental driving force of human progress and social development.In recent years,China’s economic growth has slowed down,resource and environmental constraints have intensified,the demographic dividend is gradually fading,and the social economy has entered the stage of high-quality development,which has raised the demand for new technologies and products.Innovation is an important pillar of technological progress for enterprises,but there are more obstacles in the process of enterprise financing due to the long time required for R&D activities,the high demand for capital investment and the possibility of failure.Since the reform of China’s banking industry,the market structure of China’s banking industry has been greatly developed,and the competition within banks is intense.Some scholars argue that intra-bank competition is detrimental to the relationship between banks and enterprises and to corporate innovation.Some scholars,based on their understanding of the "opportunity cost hypothesis",argue that competition in the banking industry can,to a certain extent,benefit R&D activities of enterprises.Although there is no consensus on the pro-cyclicality and counter-cyclicality of corporate innovation,it is generally accepted that the economic cycle has an impact on corporate innovation.Based on the understanding of the existing literature,this paper first analyzes the possible impact of the continuous increase in the competitiveness of the banking industry on corporate R&D activities,and after confirming the existence of this impact,further explores its intrinsic transmission mechanism.Finally,based on the close relationship between industry and economic cycle,we classify enterprises into cyclical and non-cyclical industries according to their industries and conduct a heterogeneity analysis to compare the impact of competition in the banking industry on these two industries under the economic cycle.To explore the above issues,this paper uses the sum of invention patents and utility model patents to measure the innovation level of enterprises,and the market share CR5 of the five state-owned commercial banks to measure the degree of competition in the banking industry,taking A-share non-financial listed companies from 2012-2021 as the research objects.The results of the study find that: first,a continuous increase in the degree of competition in the banking industry can significantly enhance the R&D and innovation capability of enterprises,and the financing constraint has a high explanatory power for this phenomenon.Second,economic cycles moderate the relationship between banking industry competition and firm innovation,and during economic recessions,economic cycles weaken the positive impact of banking industry competition on firm innovation.Third,firms in cyclical industries are more able to benefit from banking competition in times of economic contraction,thus promoting innovation among firms in cyclical industries.To ensure the reliability of the research results,this paper conducts a series of robustness tests,mainly including(1)adopting alternative measures of banking competition;(2)replacing the measure of firm innovation;and(3)excluding the sample of firms from municipalities directly under the central government,taking into account the special characteristics of municipalities directly under the central government.This paper also conducts an endogeneity test through the instrumental variables method.The possible contributions of this paper are mainly: first,the existing literature ignores the influence of economic cycles;this paper selects the research perspective of economic cycles to investigate banking competition and corporate innovation,and incorporates macroeconomic factors to reveal the moderating role of economic cycles,which makes the research results more effective.Secondly,the existing literature on the mechanism of banking competition to promote enterprise innovation is less analyzed,and this paper analyzes the mediating effect of financing constraints,which makes a useful addition to the existing research.Third,this paper replaces the explanatory variables from two perspectives of innovation inputs and innovation outputs,uses censored municipality data,HHI index and other indicators to replace the explanatory variables,conducts multiple robustness tests,and carries out endogeneity tests through the instrumental variables method,which enhances the reliability and authenticity of the results of this paper.