A Study On The Relevance Of Corporate Governance To Technological Innovation In Chinese Small And Medium Listed Companies

Under the competitive circumstance that is changing dramatically, possessing the sustainable innovation capability is one of preconditions for the success of the modern companies. Especially for small and medium-sized listed companies, to improve the ability of technological innovation is not only the inevitable choice to deal with the theme of market-oriented strategic change, but a positive way to enhance the capacity for sustainable development in the international competition under the new situation. Why the technological innovation capacities in different small and medium-sized listed companies are widely distinct? Which kind of factors determines the technological innovation performance in the small and medium-sized companies? To solve the above problems is the premise of providing important theoretical support for small and medium-sized listed companies to enhance their technological innovation capability.Many scholars in the West have actively explored and accumulated a great deal literature in terms of market structure, industry characteristics, entrepreneurship and financial structure of enterprise technological innovation issues. However, the traditional innovation theory of Schumpeter, and many theoretical literatures developed from the theory are all difficult to explain the question:"Why the technological innovation performance of different enterprises is distinct under the similar environment, size and marketing control ability?" With the increasingly fierce on the issue questioned, the interaction of technological innovation and institutional innovation and collaboration theory gradually formed and became the important theme of innovation economics research. As the most important institution, corporate governance and its effect on technological innovation has also been more and more concerned by the domestic and foreign scholars. Many scholars generally recognize that the corporate governance may influence the entrepreneurs’innovation behavior by the two modes of market control and organizational control. And corporate governance can also enhance technological innovation capability and performance by using incentive and constraint as the key methods and from external and internal channels. Specifically, scholars analysis and discuss the relevance of corporate governance and technological innovation in terms of ownership structure, board structure and executive incentives. However, there are still many limitations at present.In view of this, this paper builds relevance model of corporate governance to technological innovation, and deeply analyze the relevant mechanism on the basis of organizational control theory under the framework of innovation economics. Based on that model, we tests the relevance of ownership structure, board structure and executive incentive to technological innovation and hope to explore the theory system of corporate governance and technological innovation by using the panel data of Chinese small and medium-sized listed companies. According to the theoretical and empirical findings, this paper constructs a model to promote technological innovation of the small and medium-sized listed companies based on optimization of corporate governance. The model reveals how to provide a stable power mechanism through the improvement of corporate governance structures and mechanisms, namely, how to further optimize the technological innovation-oriented corporate governance system. The main innovate points are as follows:(1) based on organizational control theory under the frame work of innovation economics, we construct the relevance model of corporate governance and technological innovation on the basis of organizational control theory. It reveals the relevant mechanism between the two from the theoretical level;(2) considering to the dynamic characteristics of technological innovation, we divide the technological innovation into innovation input and output in the empirical studies;(3) we innovate and improve the empirical studies from the aspects of methods, perspectives and dimensions;(4) we construct the model to promote the technological innovation of the small and medium-sized listed companies based on corporate governance optimization.In the third chapter, we describe the evolution path of the Corporate Governance and then interpret the logical framework of organizational control theory with core ideas. On this basis, we build relevance model of corporate governance and technological innovation based on organizational control theory. This model vividly describes the relevate mechanism and specific dimensions of corporate governance and technological innovation. From that, the relevant mechanism between corporate governance and technological innovation is that the inherent characteristics of the technological innovation (e.g. risk, long-term and dynamic etc.), essentially requires listed companies should use the organizational control model which emphasizes on "value creation" rather than the control of the market control model which emphasizes the "value distribution". Corporate governance system is the most important means of control of the organization based on innovation economics perspective. But according to the core points of the theory of organizational control, only corporate governance that is established on the concept of innovation oriented resource allocation and with the characteristics of "financial commitment","strategic control" and "organizational integration" is conducive to the technological innovation of the companies. In practice, only this kind of corporate governance system is able to promote the technological innovation performance of the company.In Chapter four to six, we do empirical testes on the correlation of corporate governance (e.g. ownership structure, board governance and executive incentives) to technological innovation respectively with the panel data of Chinese small and medium-sized listed companies according to the relevance model of corporate governance and technological innovation. In the empirical research on the relevance of the shareholding structure to technological innovation, we combine empirical research methods with comparative research methods and then explore in depth how the ultimate ownership nature influences the results. That is, to research on the differences between state-controlled and non-state-owned listed companies. In the empirical research on the relevance of the board governance to technological innovation, this paper expands the research dimension of board governance to three dimensions, that is board structure, board behavior and board capital. And based on this we make empirical test on triple dimensions and then achieve some important conclusions. In the empirical research on the relevance of the executive incentive to technological innovation, we verify the curve relationship between the executive incentive contract and technological innovation from the nonlinear perspective which based on the duality of management incentive. It overcomes the limitations of conventional linear perspective. Confirmed by empirical studies, examining, degree of concentration of ownership, shareholding proportion of institutional investors, independence of the board, CEO duality, frequency of meetings of the Board, human capital of the Directors are the stimulus of corporate governance which influence the technological innovation; control right of the ultimate controller, separation of two rights, frequency that independent directors commissioned to attend the meeting are the inhibited factors of corporate governance which decrease the technological innovation; size of the board, average age of the members, the salary incentive, equity incentive and perk are the optimum factors of corporate governance which influence the technological innovation. According to the foregoing theoretical and empirical findings, we build a model to promote technological innovation of the small and medium-sized listed companies based on corporate governance optimization in Chapter7. The model classifies technological innovation into two aspects:output and input and classifies corporate governance factors into three categories:positive factors, negative factors and neutral factors. And based on this, we induce the optimization methods into three aspects such as "strengthening positive factors","weakening negative factors" and "controlling neutral factors". Therefore, to enhance the technological innovation capability of small and medium-sized listed companies, it is a temporary expedient to make variety policy support from outside. The fundamental way is to construct the endogenous mechanism to motive power of the technological innovation capability of small and medium-sized listed companies.From the all, we conclude that the optimized method of corporate governance should include three levels:technological innovation oriented ownership structure optimization, board governance optimization and executive optimization. First, it is important to establish controlling shareholder reputation incentive mechanism and credibility evaluation system. And the pyramid structure of the small and medium-sized listed companies should be optimized and the levels of the pyramid should be decreased. Institutional investors should be lead into listed companies and their positive governance behavior should be reinforced. Second, it is important to maintain the optimized board size and strengthen the communication between the directors. The independence of board should be reinforced and the positive behaviors of independent directors should be irritated. More attention should be paid to the human resource capital and social resource capital of the boards. Third, it is also important to optimize executive incentive contract. Remuneration committee of listed companies should independently design the executive incentive contract. The sensitivity between executive compensation and technological innovation should be increased. The equity incentive plan should be long-term and moderate constraint and technological innovation index should be added into the index system of vesting condition. The moderate perk level should be maintained and it can provide the executives implicit incentives to some degree.Nevertheless, this paper has some limitations below:the time span of research sample is narrow; variable design needs to be improved; research object is only confined to the internal corporate governance mechanisms, but not including the external mechanisms as well. Hence, the subsequent research should be improved in the aspects below:(1) do researches based on different contextual factors from the contingency perspective;(2) extend corporate governance from internal mechanisms to external mechanisms;(3) find the interactions between the corporate governance mechanisms and their integrated effect on technological innovation based on corporate governance integration perspective.