Impacts Of Institutional Investors On Companies' Technological Innovation On The Growth Enterprise Market

China's reform and opening up brought sustained economic growth. Entering the 21st century, challenges brought by straightforward development are obvious, such as aging of population, excess production capacity, economic structural imbalance and increasing income gap. These problems severely hinder the sustainable development of our economy. Economic development theoretical models of Marx, Schumpeter and Solow also emphasize on the importance of technological innovation on economic development. The US and Germany has always been relying on technological innovation since the late 20th century. Either the economic development theories or foreign successes show that the essence to break the bottleneck of China's economic development now is to be innovation-driven.The Chinese government has realized the importance of technological innovation since the end of last century. Under the background of "The New Normal", the power of Chinese economic growth is transfer from the elements and investment to innovation. In June 2015, the state council put forward the opinion of "Four Comprehensive" strategy to encourage people to start their own business and make innovations, supporting technological innovation through systems and mechanisms, the fiscal and taxation policy, financing channels, service development and platform construction, and the development of channels.The core issue of this thesis is that Impacts of Institutional Investors on Companies'Technological Innovation on the Growth Enterprise Market. In this thesis, the author choose to study the Growth Enterprise Market. Because In October 2009, China launched Growth Enterprise Market in order to meet the funding need of innovative enterprises, small and medium enterprises and high technology enterprises. The listed companies will be more likely to carry out technological innovation, and the market performance of their technological innovation behavior will be more intuitive. Meanwhile, the author choose to study institutional investors. The reason is that, the role of institutional investor in China's capital market is prominent currently. Compared with normal investors, institutional investors are more professional and have information superiority, leading that they are capable in searching for value. Also, institutional investors are stronger in supervision in the corporate governance. Studying impacts of institutional investors' behavior can standardize corporate governance structure.Based on the core issue, there are 3 steps in this study:First, the author study if institutional investors holding the company's share can affect the company's technological innovation. Then, according to the standard of Brickley (1988), institutional investors were divided into pressure-resistant institutional investors and pressure-sensitive institutional investors. This thesis studies the impacts of either type of institutional investors on the company's technological innovation. Finally, this thesis studies whether the input and output of technological innovation can enhance the value of the company. The logical link of the 3 levels is shown as the figure below. Institutional investors are willing to pay the supervision cost, and actively exercise their supervisory functions. Because the company technological innovation is able to enhance the value of the company, meaning the promotion of their own wealth. Institutional investors promote technological innovation through the supervision and management, bringing benefits for the company and their own wealth.This thesis's research process combines theoretical and empirical research, consisting of introduction, literature review, theoretical analysis, current situation and problems, study design, the results of empirical analysis, conclusions and policy recommendations, total 7 chapters.In the literature review part, the thesis respectively runs through the influential factors of innovative actions, value relevance and institutional investors. Based on these, the author builds her own research framework. As for the factors of innovative actions, the thesis concludes two external factors including system backgrounds and market structures. Five internal influential factors are also concluded based on financial target and ownership structure, namely, company scale, earning power, financial leverage, equity and equity concentration. And companies'technological innovation can enhance the companies'value through direct and indirect channels.The process of theoretical analysis first gives a clear definition on the core research project, namely "institutional investors" and "company technological innovation". Then, the thesis presents the core theories including innovative theory and principal-agent theory. Finally, giving "cost-benefit analysis", "institutional shareholder activism" and "career concern model", the author explains the mechanism of how can institutional investors promote the companies' technological innovation through participation in corporate governance, which is the core of the theoretical analysis. The 3 models, "cost-benefit analysis", "institutional shareholder activism" and "career concern model" answer 3 questions:Why do institutional investors influence the companies'technological innovation? How can institutional investors affect the companies'technological innovation? What is the result of institutional investors affecting the companies' technological innovation?Empirical research of the thesis starts from 4 assumptions based on theoretical analysis.H1:Institutional investors will boost companies' technological innovation.H2:Pressure-resistant institutional investors has no other benefit connections with the holding companies. So they can supervise innovation better.H3:Companies' technological innovation will improve the performance in product market. That is to say, the companies'innovative actions will improve the gross benefit of the products.H4:The companies' technological innovation will improve the value of them in capital market. That is to say, technological innovation will improve the companies' Tobin's Q Value.The thesis chooses data of the companies on the growth enterprises markets from 2009 to 2014, getting 1249 unbalanced panels as research samples. Then, the thesis makes regressions based on fixed effect model. The regression results reject H1, and support H2, H3 and H4. Moreover, if the quantities of invention patent, utility model patent and design patent are counted respectively, only the quantity of invention patent can significantly improve the gross benefit of the products and the Tobin's Q value. The quantities of utility model patent and design patent have no significant influence.After getting the regression results, in order to test the robustness of the results, the author puts the lagged one explanatory variable into the regression. And then, the weight of the component in GEI is regarded as an instrumental variables of pressure-resistant institutional investors' holding share, controlling endogenous problem. The result is proved to be robust.The thesis reaches 4 conclusions as follows based on theoretical analysis and empirical results. (1) The influence of institutional investors'shareholding on technological innovations is not significant in China. Currently, they have no enough motivations on corporate governance. The speculation atmosphere in the secondary market makes institutional investors would like to be myopic opportunists; (2) Pressure-resistant institutional investors have significant boost on technological innovations. But pressure-sensitive institutional investors don't have significant influence; (3) The investment on research and development promotes product's market performance and market value of capital obviously. As for patent applications, only application for invention patent has positive impacts on product's market performance and market value of capital. Compared with application for invention patent, design patent and utility model patent lack technical content and degree of innovation. Thus, they have less significant influence on performance and value, neither in product market, nor in capital market. Consumers and investors are not approving them; (4) Company value channel is one of the motivations for pressure-resistant institutional investors participating in cooperation governance and affecting technological innovation.Contemplating the above conclusion, the thesis raises 3 recommendations:(1) Encourage the market to develop more pressure-resistant institutional investors strongly and raise their proportion in the market. Optimize the proportion structure of them and promote them to participate in cooperate governance actively. Realize their markets stabilize and value creates goals; (2) Specify the connected transaction between enterprises and pressure-sensitive institutional shareholders. Try to avoid connected shareholders" entrenchment; (3) Encourage the enterprises to focus on quality rather than quantity, decreasing the project aiming to gain short-term benefits. In the process of forming the relevant stimulus policies, evaluation mechanism on innovation quality, rather than on the numbers should be built.Meanwhile, the thesis attempts to innovate in 3 areas:In the aspect of theoretical structure, the thesis connects institutional investors and innovative actions through the corporate values. After analyzing the motivated influences of institutional investors on corporate innovative actions, the thesis takes empirical research. As for empirical research, the thesis uses the weight of the component in GEI as the instrumental variables of pressure-resistant institutional investors' holding share, controlling endogenous problem. As for statistics choosing, the thesis obtains and compiles the annual patent applications data, considering all the listed parent and subsidiary companies. All data is obtained from the manual sorting. Also, the thesis uses the quantities of invention patent, utility model patent and design patent. In this way, the thesis can differentiate their differences among investment, applying difficulty, protecting time and economic performance.There are 2 limits of the thesis:During the process of sorting data, the thesis ignoring the dynamic changes of the institutional investors" holding share and the weight of the component in GEI during one year. As for research methods, the thesis does not distinguish the type of patents when they are regarded as explained variables. The partial least squares (PLS) regression is more suited for solving such problems. But the author is not good at PLS. In the future, it will make more sense to research methods.