Abstract
Resolving the problem of excess production capacity through sustainable technological innovation is an important issue facing the Chinese economy in achieving high-quality development. The Guiding Opinions of the State Council on Resolving the Contradiction of Severe Overcapacity promulgated by the government in 2013 undoubtedly had a huge external impact on the traditionally competitive manufacturing market. This paper uses 6680 company-year sample observations of 1609 A-share manufacturing listed companies in China from 2010 to 2017 to examine the impact of capacity reduction pressure on ‘corporate sustainable innovation’ (the strategic response made by the enterprise administrator to cope with the impacts of the external environment including economic, social and environmental aspects) investment and the moderating role of financing constraints on this relationship. The research shows that after the promulgation of the Guiding Opinions, the degree of overcapacity had a significant positive effect on the R&D investment of enterprises, indicating that the policy to resolve overcapacity promoted their sustainable innovation investment. Such a phenomenon indicates that, to a certain extent, in the context of capacity reduction, companies have strong pressure and motivation to seek a way out through sustainable innovation. However, financing constraints have a significant inhibitory influence on the anti-forcing effect of the capacity reduction policy, indicating that the ability of enterprises to respond to external capacity reduction policies is subject to their own limited financing. Further investigation shows that capacity reduction pressure mainly promotes the sustainable innovation investment of private enterprises and has no significant impact on that of state-owned enterprises. This may be because private enterprises struggled more for survival during the transition period. The results of this paper provide a theoretical basis and reference value for the formulation of government policies and the development of enterprises.
Highlights
After more than 40 years of reform and opening up, the Chinese economy has achieved rapid development, presenting a ‘dramatic growth as the world’s factory’
In the high-pressure context of resolving overcapacity, should enterprises “wait for death” or “take the advantage to be reborn”? Will overcapacity force companies to transform and upgrade through innovation? Will the degree of the financing constraints of different companies make the motives of enterprises seeking to transform elusive? These questions justify an examination of the impact of capacity reduction pressure on technological innovation and the moderating role of financing constraints on this relationship, which can provide a reference in finding an effective mechanism to resolve overcapacity and promote enterprise transformation and upgrading
Taking the data of A-share manufacturing listed companies in China from 2010 to 2017 as the research sample, this paper investigates the relationship between capacity reduction pressure and enterprise innovation investment and further examines the moderating influence of financing constraints on this relationship
Summary
After more than 40 years of reform and opening up, the Chinese economy has achieved rapid development, presenting a ‘dramatic growth as the world’s factory’. Solving the overcapacity problem through sustainable technological innovation and promoting the transformation and upgrading of enterprises has become an important issue in the process of high-quality economic development in China—an unsolved problem that the Chinese government is actively seeking to solve. In the context of the current economic transformation in China, the policy aiming to resolve overcapacity has further increased the competition and survival pressure for enterprises, giving them a stronger incentive to gain competitive advantages through sustainable innovation. The cause of this difference lies in the different reasons for the overcapacity of enterprises and in the different abilities to resolve the overcapacity caused by the heterogeneity of enterprises
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