The Financing Constraint, Government Subsidy, And Innovation Capacity Of Small And Medium Scientific-Technical Enterprises

As the integration of global economic develops further, the competition between countries all over the world constantly increases. Among the many factors that affects the comprehensive competitiveness of a country, the ability of innovation plays the most important role. As the major force in improving the innovation capacity of the country,the small and medium scientific-technical enterprise(SMSTE) has become a powerful force to promote the economic growth and increase the competitiveness of the country.Featuring high technical content, high innovativeness, high growth, high research input,and high risk, the SMSTE can quickly adapt to the requirements of market diversity and individualization, and hence possess unparalleled advantages on the aspects of innovation mechanism and efficiency. The survival basis of SMSTE is the highly technical product or service, the large-scale production and sale of which follow a series of innovation activities including research and development(R&D), sample pre-production, and test marketing. Sufficient capital is necessary in every stage,otherwise the innovation activity would be a failure even if the capital chain is cracked in a single stage. However, the huge demand of funds cannot be met only by the enterprise itself. Due to the information asymmetry caused by the highly confidential innovation project, financing institutes and external investors are hard to make an accurate valuation, which are therefore unwilling to provide funds to SMSTEs in order to avoid risks, thus the development of the SMSTE is hindered by the financing dilemma. In case that the innovation activities are left determined barely by the market but not provided with the government subsides, the SMSTE would have to abandon some activities with positive present value because of the existence of the financingdilemma, which make the innovation investment to be lower than the optimum investment level of the whole society, thus the decrease of the innovation activities would harm the economic development of the country. Consequently, whether the SMSTE faces financing constraints, and the separate and joint influences of the two factors, financing constraint and government subsidy, on the innovation capacity of the SMSTE are studied in this thesis. The main contents of this thesis are as follows:Firstly, the relevant concepts, including SMSTE, financing constraints, government subsidies, and the innovation capacity, involved in this thesis are defined, and the closely related theories such as the information asymmetry theory, the principal-agent theory, the pecking order theory, and the signaling theory are reviewed. Then, the detailed theory analysis on the financing and innovation ability of the SMSTE are performed, including contents on four different aspects, i.e., the technical innovation and enterprise growth of the SMSTE, the financing structure of SMSTEs and the financing characteristic of their innovation activities, the financing constrains and the innovation capacity of the enterprise, the government subsidies and the innovation capacity of the enterprise. Four hypotheses are proposed based on the detailed theory analysis, paving a way for the following empirical research. Thirdly, the descriptive statistical analysis is performed for the innovative activities of our country and the SMSTEs, based on the associated data from the China Statistical Yearbook and the Statistic Database of Science and Technology of China, as well as the empirical data in this thesis.Based on the above theory and current status analysis, and because that the listed companies of SME board and GEM board match the features of SMSTE, this thesis takes Euler Equations as the basis to construct the innovation and investment model of the SMSTE, utilizes the data of the three years from 2011 to 2014 of the listed board companies from the two boards, employs the techniques of two-step systematic GMM estimation, fixed effects, and mixed-OLS estimation, and then conducts the empirical researches around the four hypotheses, the first three of which are demonstrated. To test the robustness of the empirical research, several robustness examinations are taken in this thesis, including utilizing Tobin’s Q Equation to replace the Euler Equation, using interest cover ratio to replace the SA index, and using the R&D investment to substitute the intangible assets. The results of the robustness test results agree with that of the empirical parts, thus demonstrating that the conclusions of this thesis are not affected by the choice of the equation and the measurement of the financing constraints. It alsodemonstrates that the intangible assets is the proper proxy variable of the innovation investment of the enterprise.Finally, the research conclusions of this thesis are drawn and policy advices are proposed. The conclusions include: 1) financing constraints do exist in the innovation activities of the SMSTE; 2) financing constraints limit the innovation activities of the SMSTE; 3) the government subsidies have incentive effects to the innovation activities of SMSTE, which hence alleviates the suppression effects of the constraints. The policy advices are proposed from the two aspects of enterprise and government, respectively.In this thesis, a new perspective is provided for understanding the impact factors of the innovation capacity of the SMSTE, new empirical evidences are proposed for understanding the relationships among the financing constraints of the SMSTE, the government subsidy and the innovation capacity, and policy advices are also given for promoting the innovation activities of the SMSTE and improving their the innovation capacity.