Product Market Competition,Cash Holdings And Enterprise R&D Investment

Since the Reform,China's real economy is developing rapidly,and the importance of innovationdriven gained more attention.Research and development(R&D)innovation helps product upgrading,cost reduction,and improve profit,to form a competitive advantage.The enterprise's business and investment activities need internal cash holdings and external financing support.Both help R&D activities.However,with features like high investment in human capital,inconvenient disclosure of core technology and easy imitation by competitors,it makes the external financing works ineffectively,compared to internal capital,making cash holding more important.The extent of market competitiveness impacts the financial strategy and strategic allocation.With the fierce competition,On-the-job consumption reduction,cash rationally allocation and better R&D are made,to have an advantageous position in the competition.Therefore,this paper looks for whether cash holding(cash holding level,cash holding change)promotes the R&D investment of enterprises,and whether the competition of product market positively regulates the relationship between the two,alleviates the problem of internal agency of enterprises,and plays the role of external supervision and governance.It further explore whether the heterogeneity in the impact of financing constraints,and test the relationship of cash-supported R&D and the enterprises competitive advantage,as well as the mechanism of product market competition.With samples from the A-share listed companies(2007-2015),this paper explores the impact of cash holdings on R&D investment and the effect of product market competition on them.It shows: more cash holdings make higher R&D investment level.With more competitiveness,cash holdings will better promote the R&D investment.As a means of external governance,product market competitiveness effectively alleviate the problem of information asymmetry and principal-agent problem,inhibit embezzlement,optimize the efficiency of internal cash utilization,and support innovation.Therefore,cash holdings will promote R&D investment with the intensification of industry competition.This paper further studies the impact of cash holdings on the R&D investment under different financing constraints,and finds out that cash holdings have a more significant positive effect on technological innovation in enterprises and industries with high dependence on external financing and serious financing constraints,and the market environment has a more significant positive regulatory effect on the cash holdings and R&D investment.In addition,based on the control of capital investment,this paper examines the competitive advantage of cash-based R&D,and the product market competition reduces agency distress with governance effect,to boost the promotion.Thus,enterprises should accumulate internal capital use financial flexibility to ease financing problems,and be updated to te product market trend,with the external governance effect,improve the efficiency of cash utilization,strengthen the intensity of R&D investment,and ensure the smooth progress of R&D activities,thus forming a unique competitive advantage.