A Study Of The Impact Of Economic Policy Uncertainty On Corporate R&D From The Perspective Of Financing Constraints

Macroeconomic policy changes have an important impact on firms’ financing constraints and innovation behaviour.As pioneers and practitioners of technological innovation,enterprises need not only sufficience cash flow reserves,but also incentives and guarantees from the policy system.Under the impact of continuous economic turmoil,enterprises not only face the difficulties of financing constraints and delayed returns,but also need to adapt to the external market risks caused by frequent macroeconomic policy adjustments,which can dampen their confidence in R&D and innovation.Therefore,clarifying how the variability of economic policies affects corporate innovation during the stage of industrial restructuring will not only help policymakers to control the negative externalities of economic policy adjustments,but also provide the necessary micro-foundation for companies to optimise their R&D investment and financing.Using a qualitative and quantitative research framework,this paper provides insights into the microeconomic effects of economic policy making and risk based on the issue of corporate R&D investment and financing.Firstly,the relationship between policy uncertainty and the corporate sector is elaborated in the light of the literature,in particularly,a comprehensive theoretical explanation of the mechanisms by which policy uncertainty affects innovation is developed based on the theoretical framework of financing constraints.This is followed by a mechanistic analysis of the differential performance of firms’ innovation financing channels in response to policy uncertainty shocks,exploring how uncertainty risk causes increased internal and external financing constraints for firms and feasible innovation financing options.Immediately following the empirical evidence,the Euler equation model of R&D investment is constructed based on the first-order systematic GMM estimation method by selecting data related to manufacturing companies listed in Shanghai and Shenzhen A-shares from 2007 to 2020,and empirically analyses the impact of economic policy uncertainty on innovation investment in micro entities.The impact of uncertainty on innovation is explored through six main sources of financing: corporate operating cash flows,external debt and equity financing,internal cash savings changes,informal financing,and government subsidies,while differences in the impact of policy uncertainty indices are explored for heterogeneous groups of firms and different source categories.The findings of this paper suggest that economic policy uncertainty as a market risk factor inhibits micro-firm R&D investment,and that much of this disincentive comes from the exacerbation of firms’ R&D financing constraints.This is manifested in reduced operating cash flows,external debt and equity financing support for corporate innovation,while endogenous cash holdings and informal financing,as well as government subsidies,smooth out the dampening effect of uncertainty shocks on R&D investment.Further analysis shows that the impact of economic policy uncertainty on heterogeneous business entities varies,with different sources of economic policy uncertainty disincentivising investment in innovation in different ways.Overall,economic policy uncertainty exacerbates firms’ R&D financing constraints,inhibiting their R&D and innovation dynamics as well as the long-term and stable accumulation of future innovation competitiveness.Based on systematic analysis,this paper provides new empirical evidence and guidance for the decision and management of corporate R&D investment and financing under economic policy uncertainty.