An Empirical Study Of Institutional Environment, Cash Flow And R&D Performance

R&D activity is the source of a company’s value growth and core competitiveness. In recent years, facing increasingly fierce market competition, more and more companies recognize the importance of innovation, and increase R&D investment accordingly. By 2011, China has became the second largest country in total R&D investment. Nevertheless, China’s R&D performance did not increase accordingly, is still lower than many OECD countries. This led scholars to ponder the influence of institutional environment on R&D performance. On the basis of absorbing foreign research, this paper discusses the impact of external and internal factors on the R&D performance, mainly discusses the impact of the institutional environment and cash flow on R&D performance, and the impact of cash flow on R&D performance under the regulation of institutional environment. This paper gives important implications for government policies making and company R&D activities.General theory told that high cash flow can promote enterprise R&D performance, and the empirical studies of this paper found that cash flow has a significant role in promoting R&D performance, but the promotion effect of higher cash flow on the R&D performance is not significant. The reason was found through by sub-sample studies, which said high cash flow caused excessive investment in the nature of the state-owned property. In this paper, the moderating effect of institutional environment was considered to change the above phenomenon. The institutional environment contains three aspects: the level of government intervention, the level of property rights protection and the level of financial development. By considering the moderating effect of institutional environment, the paper has corrected the view that the impact of cash flows on R&D performance is influenced by the the nature of property rights.The arrangements of this paper are as follows: Firstly, the paper summarizd the results of previous studies, analyzed the impact that institutional environment and cash flow on R&D performance based on the information asymmetry theory, the theory of institutional economics, resource-based view theory, established a theoretical framework, proposed hypothesis, and built some construct multivariate linear regression models. Secondly, the 2008-2013 data of the companies from the SME board who published R&D information are selected as study sample. The sample divided into four groups by cash flow and the nature of property rights. Then an empirical study was conducted with SPSS19.0 statistical software, the effect of institutional environment and cash flow on R&D performance were tested through the linear regression. Furthermore, the incremental impact of cash flow on R&D performance under the moderating effect of institutional environment was tested too.The results of the empirical research as follows:(1) Cash flow has a significant role in promoting R&D performance.(2) For the non- state-owned property company of high cash flow, the more positive impact of cash flow on R&D performance than more the state-owned property company.(3) Government intervention is passive to R&D performance.(4) The protection of property rights can actively promote the improvement of R&D performance.(5) The level of financial development has a positive impact on R&D performance.(6) In the low government intervention areas, the higher cash flow can lead to more R&D performance increasing.(7) In the high property rights protection areas, the higher cash flow can lead to more R&D performance increasing.(8) In the highly financial development areas, the higher cash flow can lead to more R&D performance increasing.