Financial Constraints and Firm Innovation Decision: The Roles of Corporate Governance and Risk Diversification

Firm innovation decision is subject to the influence of financial constraints, but the mechanism through which this impact occurs remains unclear. Using a nationwide representative survey data set of private firms in China in 2016, we first identified the strengthening effect of financial constraint...

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Bibliographic Details
Published inEmerging markets finance & trade Vol. 61; no. 5; pp. 1428 - 1445
Main Authors Hong, Cancheng, Ren, Ting
Format Journal Article
LanguageEnglish
Published Abingdon Routledge 09.04.2025
Taylor & Francis Ltd
Subjects
Corporate governance
Diversification
Financial constraints
firm innovation decision
Innovations
risk diversification
Risk management
China
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Summary:Firm innovation decision is subject to the influence of financial constraints, but the mechanism through which this impact occurs remains unclear. Using a nationwide representative survey data set of private firms in China in 2016, we first identified the strengthening effect of financial constraints on firm innovation decision, and further demonstrated the influence of corporate governance and risk diversification on such a relationship. The results show that firms tend to increase investment in innovation to improve operations when facing tighter financial constraints. Firms with suboptimal corporate governance and better conditions of risk diversification tend to adopt riskier innovation strategy to cope with tighter financial constraints.
Bibliography:ObjectType-Article-1
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ISSN:1540-496X
1558-0938
DOI:10.1080/1540496X.2024.2420605