Research On The Smoothing Effect Of Working Capital On Enterprise Innovation Investment

Under the new normal economic background,it has become the main theme of the times to promote economic transformation through innovation investment.As the main body of innovation,it is particularly important for enterprises to maintain the sustainability of innovation investment,because the interruption of investment in innovation will generate high adjustment costs.In order to avoid high adjustment costs,enterprises produce a motivation to smooth innovation investment,which requires sustained financial support.However,in reality,innovation investment generally faces financing constraints and overly relies on internal cash flow,but internal cash flow is full of uncertainty.Under the common restrictions of internal cash flow and external financing conditions,how to ensure the sustainability of innovation investment has become an urgent problem for enterprises to realize innovation development.Based on this,this paper presents an empirical analysis of the smoothing effect of working capital on innovation investment by taking the data of 404 Chinese GEM listed companies during 2010-2016 as samples and using Tobin Q model to depict the innovation investment.The empirical results show that: working capital has an effect of smoothing innovation investment,which avoids the high adjusting-cost due to the fluctuation in innovation investment and ensures the sustainability of innovation.In addition,financing constraints can promote the smoothing effect of working capital on innovation investment.In other words,the more the financing constraints,the more significant the smoothing effect is.The results offer guidance for how to maintain the sustainability of innovation investment.On the one hand,three suggestions are provided to the enterprises on the micro level.Firstly,improving management consciousness and management level of working capital;secondly,giving managers more financial integration rights;thirdly,making full use of government support and actively developing financing channels.On the other hand,four suggestions are provided to the government on the macro level.Firstly,increasing the tax preferences;secondly,establishing a bank-enterprise cooperation mechanism;thirdly,encouraging financial innovation services;fourthly,improving the capital market environment.