Research On Firm Size Threshold Effect Of Innovation

Along with the economic globalization and the increasing economic openness, lead to further international competition, especially after China’s entry into the WTO. The current economic and social development is mainly driven by science and technology, it not just the application of new technology in production activities, it is also a combination of technology and economic development favorable channel. Undoubtedly, technology innovation occupies the core status in in the national innovation system. Technical innovation, as a primary way of combining economy and technique, is the core innovation system in a country. As the central component of innovation, it is necessary for company’s survival to take technical innovation, so as to do research on technical innovation in companies. For the concrete enterprise, it is very significance to do the research of technology innovation, so it must rely on more positive to survive.Schumpeter in1942that has a monopoly of big companies is more advantageous to enterprise’s technological innovation, this view is put forward after research on the relation between technology innovation and enterprise scale has become the focus of extensive discussions and academic research. But not all companies are able to or is suited for technological innovation, this is because the costs and risks of the technology innovation, enterprises in the different section, different industries will have different ways for technological innovation, In other words, the effect of technology innovation is affected by enterprise’s scale, industry environment and national policy influence, etc. So, what kind scale of company will do the best in technical innovation? How is it between firm size and technical innovation?Firm size as a category independent variables can be more effective to reveal the differentiation of different scale enterprise technology innovation impact and effectiveness of industrial policy in a particular situation. The paper based on the threshold of the panel data model developed by Hansen (2000), it can be more effective inspection of the complex relationship between firm size and technology innovation, especially for accurate estimate about the jump range. We find that there exists threshold effect in firm size, and in the different firm size, there has different effect effort. The relationship is under restrictions and impact of some factors, such as industry characteristics and the government subsidies etc.. The Research suggests that the threshold regression model well explain the complicated nonlinear relationship and transition process between firm size and technological innovation, providing a new view and method, and also supplying some scientific proof for the management and industrial policy to decide firm size and innovation investment.First of all, this paper introduces the current research situation about the relationship between firm size. and innovation from domestic and foreign. Respectively summarized the large conducive to technological innovation and small enterprises is beneficial to the view of technology innovation, as well as the threshold effect between also carried on the detailed review. Second, establishing a simple multiple linear regression model, the quadratic function model and panel threshold model, using the data collected to make empirical test and analysis. We can say that the relationship between firm size and technology innovation is not a simple linear correlation, but become a kind of threshold effect. We get three threshold values, which divide firm size into four ranges, the influence of different firm size in each interval is different. Finally, on base of empirical analysis, we support some suggestions on how to improve enterprise innovation ability, some scientific proof for the management and industrial policy to decide firm size and innovation investment.