Research On The Effect Of China’s Financial Development On Enterprise Technological Innovation

Technological innovation is the eternal theme of economic development, andenterprise is the mainstay of technological innovation. Capital is one of the twodecisive factors for technological innovation activities. Financial system can providefinancing channel for enterprises under technological innovation and improve theefficiency of their investing. How to combine the finance and technology closely, andtherefore to promote China’s industry transformation and the development ofinnovative economy, is an important and urgent task in the process of China’seconomic development. This paper presents an exploratory research to promote thesupporting function of China’s financial system on enterprise technologicalinnovation.After defining the relevant concepts and research scoping of financialdevelopment and enterprise technological innovation, a theoretical study based on theexisting research results at home and abroad is conducted. Due to the uncertainty andhigh risk of technological innovation, there exists serious information asymmetrybetween financial institutions (or suppliers of capitals) and the enterprises undertechnological innovation in the course of financing, such as the adverse selection andmorality risks. These problems will increase the risks of financing and underminefinancial institutions’ will to invest in enterprises under technological innovation.From the perspective of information economics, this paper argues several behaviorsselected by various financial arrangements to overcome the problem of informationasymmetry, including the indirect financing by commercial bank, equity financing incapital market, and venture capital, thus clarifying the function of financialarrangements on enterprise technological innovation. According to the credit rationingtheory proposed by Stiglitz and Weiss (1981), it has studied the basic principle ofcommercial bank’s means in dealing with the problems of information asymmetrymentioned above, such as interest discrimination and relationship finance. Besides,based on the model of diversified views of Allen and Gale (1999), it has illustrated theinformation processing advantages of equity financing arising from dispersedinformation collection and capital pricing mechanism, and further proposed a varietyof contractual arrangements and incentive mechanisms used by the venture capital forenterprises under technological innovation of different growing stages. In this paper, the indicator system of financial development and enterprisetechnological innovation is devised by following the scientific, simple, effective andviable principles. Via the results of the canonical correlation analysis of the indicatorsin related to the macro level, commercial bank, traditional capital market, and venturecapital of financial development on one hand and the input, R&D and application ofenterprise technological innovation on the other, this paper compresses each set ofvariables and makes a general test of the compressed variables: cointegration test andpolynomial distributed lag model show that the four levels of financial developmenthave long-term influence on enterprise technological innovation; granger causalitytest shows that macroscopical finance, commercial bank and traditional capital marketare the granger reason for enterprise technological innovation while venture capital isnot, and enterprise technological innovation is the granger reason for venture capital;variance decomposition model test shows that commercial bank and traditional capitalmarket make greater variance contribution to enterprise technological innovationvariance that macroscopical finance and venture capital.This paper, based on the tests above, makes a retest of the influence ofcommercial bank and stock market on enterprise technological innovation. In theretest about commercial bank, the structure of the banking sector and credit structureare selected to stand for the degree of competition in the banking sector and the effortsput in by the bank credit to non-state-owned economy, and further stand for thedevelopment of commercial bank; moreover, setting five control variables, includinggovernment administrative intervention on enterprises, the development ofnon-state-owned economy, local protection in the commodity market, the legal systemenvironment, and the degree of introducing foreign capital, this paper gives aregression analysis using the panel data of thirty-one provinces, which shows that thestructure of the banking sector and credit structure have significant explanatory powerof enterprise technological innovation; after the control variables are introduced, thestructure of banking sector and credit structure have decreasing explanatory power ofpatents while the former has rising explanatory power of the turnover of technicalmarket. When retesting the influence of stock market, R2is selected to stand for thedegree of technological innovation of listed companies. R2is the goodness of fit ofregression result between private stock rate of return and the market rate of return,which is based on the Capital Asset Pricing Model (CAPM). And then, based on thepanel data model of listed company, it tested the influence of Shanghai A-Stock, Shenzhen A-Stock main board and Shenzhen small and medium-sized boardsrespectively, followed with the industry-based retest of technological innovation levelof the main board listed company. After that, this paper tests the influence of R&Dintensity as the proxy of technological innovation level of listed companies and,eventually, makes a comparison between the two test results, which shows that equityfinance is more favorable to listed companies’ technological innovation than debtfinancing and the development of multi-level capital market is beneficial to the listedcompanies’technological innovation.Based on the empirical study, theoretical analysis, and the actual influence ofChina’s financial development on the enterprise technological innovation andcombined with the successful experience from foreign countries, this paper points outthe phenomenon about the inadequate role China’s finance plays in supportingenterprise technological innovation as well as what causes this phenomenonfundamentally is the imperfections of our existing economic system and financialsystem, so as to propose suggestions to promote the in-depth integration of ourfinance and enterprise technological innovation from the main level and operationlevel: a multi-level commercial bank system should be established and businessinnovation be promoted; Diversified capital market should be further developed andperfected; the government should strengthen guidance and motivation on relevantsubjects in microcosm and shape and optimize the external environment for finance tosupport enterprise technological innovation from the macroscopical point of view forthe implementation of financial innovation to promote technological innovation aswell as targeted support for enterprises under technological innovation in differentdevelopment stages of various commercial banks and capital markets.