Financing the R&D investment of Chinese firms: state-owned versus private firms

We investigate the effect of financing constraints on the R&D investment of Chinese listed firms for the period 2010-2020. The sample is divided into state-owned versus private firms, which differ substantially in R&D patterns, financial structures, and other characteristics. We find that, i...

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Bibliographic Details
Published inApplied economics Vol. 56; no. 12; pp. 1347 - 1362
Main Authors Kim, Yun Jung, Quan, Mei
Format Journal Article
LanguageEnglish
Published London Routledge 08.03.2024
Taylor & Francis Ltd
Subjects
China
Companies
Economic analysis
Economic theory
Finance
Financing
financing constraints
Investments
R&D
R&D investment
Research & development
Securities markets
state-owned and private firms
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Summary:We investigate the effect of financing constraints on the R&D investment of Chinese listed firms for the period 2010-2020. The sample is divided into state-owned versus private firms, which differ substantially in R&D patterns, financial structures, and other characteristics. We find that, in both state-owned and private firms, internal cash flow significantly affects R&D investment, suggesting the presence of binding financing constraints. Both state-owned and private firms actively manage liquid assets to smooth R&D spending. Debt finance is insignificant for both state-owned and private firms. New stock issues have a significant positive effect on R&D in private firms only, not in state-owned firms. Given that the contribution of private firms to aggregate R&D is increasing, stable stock market conditions may have an important aggregate impact on R&D.
ISSN:0003-6846
1466-4283
DOI:10.1080/00036846.2023.2176449