Financial Constraints,Financing Channels And Corporate R&D Investment

Research and development (R&D) is one of the key factors to promote the growth of modern economy. Successful R&D investment cultivates the core competitiveness of enterprises for sustainable competitive advantage. But difficulty of R&D financing leads to the low level of R&D investment. The existing theoretical discussions and empirical researches have verified the existence of R&D financing constraints in many western countries. But few studies have focused on this issue in China.An empirical research was conducted in this paper to study the financing constraints of Chinese companies’R&D investment. The unbalanced panel datasets included observations for640Chinese listed companies for5years. System-GMM method was used to estimate the dynamic R&D regression models. Regression results show a strong evidence of financing constraints for R&D investment. After controlling firm efforts to smooth R&D with cash reserves, equity finance shows a positive effect on firm’R&D investment, while debt finance has no influence on R&D investment.After separating the sample by ownership property and age, non-state-owned enterprises and younger enterprises were founded facing more serious financing constraints. State-owned enterprises prefer equity funds for R&D investment, while non-state-owned enterprises prefer debt financing for R&D investment. Compared to mature companies, young companies use equity funds to invest R&D. Non-state-owned and younger enterprises were more motivated to smoothing R&D investment with cash holdings.