Effect of Financing Structure on Technological Innovation for China’s Industrial Software Industry: Case Study of Empyrean Technology Company

Abstract

After being banned from using many important foreign industrial software, China promotes the development of domestic industrial software as a national strategic goal. There are many literatures analyzing the promotion effect of policy on technological innovation of China’s industrial software, but there is still a gap in the research on the effect of financial structure. Taking Empyrean Technology Company as an example, this paper analyzes the effect of financing structure on technological innovation in company’s different development periods. In entrepreneurship stage, the company’s technological innovation is mainly driven by internal financing and government subsidy. In growth stage, equity financing plays a greater role in promoting technological innovation than debt financing. Therefore, the study suggests China’s industrial software enterprises to actively apply for government subsidies in entrepreneurship stage and to explore equity financing channels in growth stage. Chinese central government can encourage more venture capital to be invested in industrial software industry by improving equity exit mechanism.