Abstract
Using data from the World Bank China Enterprise Survey, this paper empirically examines the impact of bank credit corruption and government-enterprise relations on enterprises' R&D investment. We find that: the existence of bank credit corruption raises the cost of capital of enterprises and thus inhibits their investment in innovation; the inhibitory effect of bank credit corruption on enterprise innovation is more evident for small enterprises; the more economically developed a region is, the more corruption reduces the R&D motivation of enterprises, and credit corruption inhibits the promotional effect of government-enterprise relations on enterprises' investment in innovation.
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