Abstract
This study analyzes the influential factors underlying corporate innovation input decisions with a theoretical framework based on Cournot Equilibrium in game theory. By identifying the influential factors in theoretical deduction, we incorporate these factors with a sample of Chinese listed companies to empirically examine their impact on corporate innovation input decisions (e.g., R&D investment). The results reveal that corporate innovation input in terms of R & D investment is negatively associated with innovation risk, product cost and cost of capital, and positively related to profitability and innovation efficacy, which are consistent with the inferences of the theoretical framework and confirm the validity of our analytical model. With expanded sample range (multi-industries) and incorporation of market and governmental factors simultaneously, the findings are confirmatory to the main views of previous studies, and help to clarify the inconsistency in the findings in the extant literature. However, our empirical findings show that the type of business ownership (nature of equity right) and the level of regional marketization development do not significantly affect corporate R&D investment by the sample Chinese listed companies at present. This may be an evidence to support the development status of a market economy in China.
Highlights
Corporate innovation input decision making is subject to the influence of many factors, including the price and cost of product, operating profitability, the risk and efficacy of innovation projects, the cost of capital for innovation investment, the demand function, and the market and government regulations
We conduct a theoretical deduction to determine the key influential factors for corporate innovation input decisions based on Cournot game theory, incorporating multi-dimensional factors from the perspectives of firm, government and market simultaneously
The results of this study confirm that our analytical framework is applicable to more fully examine corporate innovation input decision making in light of R&D investment by business enterprises, and can help clarify the inconsistency of the findings in previous studies
Summary
Innovation is the first driving force behind technological competition, and busi-. Z. Prior research on the influential factors underlying corporate innovative activities is lack of generally-accepted theoretical framework, and the conclusions obtained in the extant literature are varied, or even contradictory (Mairesse & Mohnen, 2002; Lee, 2005). This warrants further theoretical and empirical analysis of corporate innovation decisions. It is noted that the nature of equity ownership (i.e., types of enterprise property rights) and the level of regional marketization development do not have a significant impact on the innovation input (R&D investment) decisions by Chinese business enterprises at present, which deviates from that of earlier studies. It may be a supporting evidence to indicate the establishment of market economy status in China
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