Social Capital,Financing Constraints,and Enterprise Innovation Capacity In Pricate Sector

Innovation is one of the enduring important proposition in economics, with thedeepening study of innovation theory，domestic and foreign scholars on innovation isnot limited to the innovation itself, but also gradually began to focus on theenvironmental and structural of innovation, focus on the non-material factors,non-technical factors on the impact of innovation capacity of enterprises, includinginstitutional, policy, culture, norms, trust, and so on. At the same time, with socialchange and economic development, innovation also breaking the original form andscope, from a single organization’s internal environment to society, innovation is nowwidely considered to be a social process. In the current context of China’s economictransformation, the formal system is still not perfect, the government is lack adequateprotection of private enterprises’ property rights and credit support, therefore,enterprises tend to build a strong social capital and extensive social connections, expectthis kind of social capital can help them obtain scarce resources and information tofurther enhance innovation capability.At the theoretical level, we find that corporate social capital will affect the enterpriseinnovation ability, but also has some connection with financial constraints. According toChina’s realities and past scholars study found that financing constraints for innovationalso has a direct impact. Thus there is clearly a relationship among the three behavioralvariables of corporate social capital, financing constraints, and innovation capacity. Thispaper systematically reviews the social capital, financing constraints these two factors inthe mechanism of innovation and be the model portrayed. Specifically, this papercombines with the reality of China’s private enterprises innovation, and in accordancewith the chain mechanism of "social capital-financing constraints-innovationcapacity", puts forward four empirical proposition:(1)Corporate public relations feesexpenses by affecting the enterprise debt maturity structure, improve the innovationcapacity of private enterprises.(2)Corporate public relations expenditure by loweringfinancing costs, improve the innovation capacity of private enterprises.(3) Whencorporate belong to a higher level of subordinate relations, can help companies gainmore long-term loans, thereby further enhance the innovation capacity of privateenterprises.(4) When companies belong to higher level of subordinate relations, can help companies reduce financing costs, so as to further enhance the innovation capacityof private enterprises.In the empirical analysis, we use the16,008private enterprises balanced panel dataof2000-2007Chinese industrial enterprises Library, the use of Probit and OLS modelexamines the impact of social capital the key variables on Chinese private enterpriseinnovation ability and financial constraints. We first reference to Jun Du (2013) et al.,Use of corporate public relations expenses of the variable to characterize the socialcapital and use direct measurement methods-from corporate debt maturity structure andfinancing costs of the two different perspectives to measure financial constraints, this isalso a major innovation of this paper. We find that the formation and maintenance ofprivate enterprise public relations expenses of social capital, on the one hand, there is asignificant positive relationship with the companies to obtain long-term loans, privateenterprise to build a relationship with their inherent investors, this social capital canhelp improve the debt structure of enterprises, so that enterprises can obtain morelong-term cash flow for innovation; on the other hand, this social capital can helpcompanies obtain lower financing costs, making it in a shorter period of time, spendinglower cost acquisition fast and effective financing support, both financial constraintsimprovement can further improve the innovation capacity of private enterprises.We also from subordinate relations of private enterprises with governmentmember-the point of view of this vertical relationship of the political capital to measurecorporate social capital, the study find the subordinate relationship through affectcorporate debt maturity structure and financing costs, to further generate links withbusiness innovation capability. The corporate belongs to the higher level of subordinaterelationship, can easier access to long-term loans and obtain lower the cost of financing.And this favorable condition of innovation fund is possible to improve the innovationcapacity of private enterprises.Under the background of Chinese economic transformation, this article provides anew perspective for understanding the factors of china’s private enterprises, and alsoprovides a new empirical evidence of the microscopic mechanism of the relationshipamong social capital, financing constraints and business innovation capability.Whileprivate companies can build social capital, in order to weaken the adverse effects offinancing constraints on enterprise innovation ability, but we do not advocate that allbusinesses have to establish such a social capital: First, build social capital takes acertain cost, as used herein, public relations expenses, and when all companies to develop social relations, which build social capital will inevitably become inefficientactivities. Second, encourage the development of social capital would also endanger theimprovement of China’s socialist market economic system. Finally, we believe thatimproving formal institutions (such as law) is the first choice for enterprises to easefinancing constraints to improve innovation ability.