Innovation Financing and Innovation Smoothing: Financing Constraints
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| Title | Innovation Financing and Innovation Smoothing: Financing Constraints
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| Author | Ju Xiaosheng and Dic Lo |
| Organization | Renmin University of China; London University's School of Oriental and African Studies |
| Email | fuxiao0912@163.com,diclo@soas.ac.uk |
| Key Words | Financing constraints; Internal financing; Working capital; Innovation |
| Abstract | This paper uses a panel of Chinese unlisted industrial enterprises over the period 1999-2008 to analyze the relationship between financial constraint, working capital management and enterprise innovation, by which it explains the enterprise innovation boom in China ever since the end of last century from micro perspective. We group the enterprises into four categories by ownership, and find that the innovation in four types of firms increases stably in a high rate but the reasons are different. The continuous innovation of state owned enterprises is sustained by non-financial constraints; that of foreign enterprises benefits from low financial cost, while working capital management also plays a role; the private and collective enterprises which suffer seriously financial constraint and thus rely on internal finance mainly smooth their innovation activities through working capital management. The more serious financing constraints the enterprises face, the more important role the working capital plays. |
| Serial Number | WP230 |
| Time | 2012-02-23 |
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