An Evaluation of the Efficiency of Chinese Industry Enterprises’ Innovation Performance
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| Title | An Evaluation of the Efficiency of Chinese Industry Enterprises’ Innovation Performance
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| Author | Yahong Zhou Xiaodan He and Yao Shen |
| Organization | Shanghai University of Finance and Economics, Shanghai University of Finance and Economics, Shanghai University |
| Email | yahong.zhou@mail.shufe.edu.cn |
| Key Words | Innovation, R&D, Cobb-Douglas production function, IV regression, Chamberlain’s random effect approach. |
| Abstract | In this Post-Crisis era, China’s economy is now facing a big challenge. With the change of the global economic environment, it is a critical period now for China’s economic transition. This situation strongly requires Chinese industry enterprise’s innovation. And only in this way, China’s enterprises could survive in international competition. In this paper we will discuss the performances of innovation of China’s enterprises. As we know that this is a hot research topic in recent years, and there are a lot of relevant literatures, both in foreign and domestic journals, on the R&D performances. However, there are still some main drawbacks in these literatures. For example, self-selection in the firm’s R&D inputs is seldom discussed, and R&D’s cumulative effect on production has not been emphasized. These drawbacks motivate us to propose more appropriate way to evaluate the efficiency of the innovation performance. In the theoretical part of this paper, we establish models of firms’ innovation determination and production function. To avoid possible model misspecification, we adopt Chamberlain’s random effect approach to estimate the binary probit choice model which determines whether an enterprise engages in R&D activity , and then use the probit fitted value as the IV of R&D input in the linear regression of production function. By using a dataset containing more that 30000 firms in different economic sectors in China from year 2005 to 2007, our empirical result shows that the elasticity of R&D on the added value is 5.5%, which implies that traditional approach underestimated the efficiency of R&D input for the China’s industrial enterprises. |
| Serial Number | WP199 |
| Time | 2012-02-15 |
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