Affects Corporate Innovation Research Articles

Interest rate liberalization and corporate innovation: Evidence from natural experiments in China

AbstractWe examine whether and how interest rate liberalization affects corporate innovation in China. Using the removal of the interest rate ceiling and floor as exogenous shocks, and the numbers of granted patents to proxy for corporate innovation, we find that corporate innovation increases after interest rate liberalization. Our finding holds through several robustness tests. Furthermore, we show that state‐owned enterprises (SOEs) and non‐SOEs benefit from interest rate liberalization differently: Non‐SOEs benefit more from interest rate ceiling removal, whereas SOEs benefit more from interest rate floor removal. Cross‐sectional analyses also show that the effect is more pronounced when bank competition is higher and when firms rely more on external finance. Exploring potential channels through which interest rate liberalization spurs innovation, we find that although ceiling removal mitigates firms’ financial constraints, floor removal lowers corporate loan costs. Our study provides evidence of how financial reform benefits the real economy.

Can changes in corporate income tax rate affect corporate innovation?

The relationship between corporate income tax rates and innovation is a critical international issue. Existing studies often overlook the potential mechanisms of market competition and productivity heterogeneity. This paper addresses these gaps by integrating these elements into a unified mathematical analysis framework. Using China's corporate income tax reform as a quasi-natural experiment, this study empirically tests the model. The findings reveal that decreases in tax rates significantly foster innovation, while increases have the opposite effect. The underlying mechanism involves market competition, with the impact of tax changes being more pronounced in firms with higher productivity. This study deepens the understanding of the nexus between corporate income tax and innovation, providing new insights to refine tax policies that promote innovative economic development globally.

The Impact of Private Equity on Corporate Innovation

Private equity plays a crucial role in today's economic environment and has a profound impact on corporate innovation. This study aims to explore in depth how private equity investment affects corporate innovation and to reveal the mechanisms behind this impact. By constructing a linear regression model, the study finds that private equity investment has a positive effect on firms' R&D investment and patent output, thus proving that private equity investment promotes corporate innovation. The empirical evidence in this paper reveals the investment logic of private equity investment, provides an analysis of the process of the role of private equity investment in influencing corporate innovation performance, and enriches the research on the factors affecting corporate innovation performance. The findings of this paper are of practical significance in guiding private equity investment to enhance corporate innovation.

ESG, Digital Transformation and Corporate Innovation

ESG has now become an important topic in sustainable development. To explore how ESG affects corporate innovation, and what the role played by digital transformation is in the relationship, we employ the fixed effect model for analysis, utilizing data from A-share listed data between 2012 and 2021. In further analyses, it was tested whether the type of pollution in the industry and the corporate ownership property had an impact on the association between ESG and corporate innovation capacity. According to the empirical evidence, we know that (1) ESG has a significantly positive impact on corporate innovation capability. (2) ESG has a significantly positive effect on corporate digital transformation. (3) Digital transformation plays a mediating effect between corporate ESG and corporate innovation capability. (4) According to the heterogeneity analysis, we know that ESG of non-state-owned corporates plays a greater role in promoting corporate innovation capability; ESG of non-heavily polluted industries plays a greater role in promoting corporate innovation capability.

Geopolitical risk and corporate innovation: Evidence from risk preference and risk-taking capacity perspectives

This paper investigates how geopolitical risk affects corporate innovation from the perspectives of corporate risk preference and risk-taking capacity. We document a significant positive impact of geopolitical risk on corporate innovation and find that corporate risk preference and risk-taking capacity strengthen the positive impact of geopolitical risk. Further analysis shows that market competition and corporate financial asset holdings are potential channels through which geopolitical risk increases corporate innovation.

CTO Network Centrality and Corporate Innovation

Social network centrality of chief technology officers (CTOs) affects corporate innovation. Firms with CTOs who are well-connected within the network of all business professionals invest more in research and development (R&D), receive more patents, attract more patent citations, and create more patent value. Besides the effect of the general business network centrality, higher professional network centrality of CTOs (within the network of all other CTOs) also fosters corporate innovation. In addition, firms innovate more and better if CTOs are hired by the incumbent CEOs. Ultimately, R&D investment of companies with high-centrality CTOs enhances firm value.

Listing on the stock exchange and firm innovation

This paper selects China's A-share listed companies from 2017 to 2022 as a research sample. It investigates the impact of listing on the innovation activities of enterprises and the mechanism of the role of stock exchange listing. It is found that stock exchange listing will have a significant inhibitory effect on corporate innovation; stock exchange listing affects corporate innovation by influencing the company's tax burden and the company's financing constraints.

Monetary policy shock and corporate innovation: Evidence from China

This paper investigates whether and how monetary policy shock (MPS) affects corporate innovation using a large sample of 3,082 Chinese listed firms over the period 2007–2019. We provide robust evidence that firms increase their innovative activities when faced with MPS. Further analyses show that firms in competitive industries or with less market power are more inclined to increase innovation in the event of MPS, and that the influence of MPS on corporate innovation is more pronounced for firms with more growth opportunities or better financial conditions. We also find that firms tend to increase innovation to a larger extent in expansionary periods than in contractionary ones.

Human capital in the financial sector and corporate innovation: Evidence from China

This paper investigates how human capital in the financial sector affects corporate innovation. Based on China's National Economic Census in 2008, we construct a measure of the financial sector's human capital across prefecture-level cities and then match the data with nonfinancial listed firms over 2009–2017. We find that human capital in the financial sector plays a significant and positive role in firms' patent quantity and quality; this effect is more pronounced for firms with higher R&D intensity, more serious financial constraints, lower industry competition and those located in regions with lower bank density and lower marketization levels. Furthermore, the mechanism tests show that debt issuance and R&D investment increase as more highly educated workers flow into the financial sector, while the cost of debt and the cash flow sensitivity of fixed assets investment decrease, consistent with the credit constraints channel. Our findings argue that increasing human capital in the financial sector does not impede corporate innovation but strengthens corporate innovation by reducing the information asymmetry between the financial and productive sectors.

Short-term success and long-term failure? The case of GDP growth targets and corporate innovation

Excessive focus on achieving short-term economic success in China may risk its long-term prosperity. Using a large sample of Chinese listed firms, we find that a higher GDP growth target suppresses corporate innovation, and the relationship is more pronounced in less developed areas. We also find that local governments affect corporate innovation through both direct and indirect mechanisms. The direct mechanism shows that firms that are more subject to government intervention (e.g., large firms, SOEs, and grantees of government subsidies) exhibit a more negative relation between GDP growth targets and corporate innovation. The local government also strategically changes its fiscal spending, creating an environment that indirectly affects corporate innovation. Our results are robust to various robustness checks. Further analysis reveals that the negative effect of GDP growth targets on corporate innovation is exacerbated in less developed areas and that a reduction in R&D does not lead to less purchase from suppliers or less employee compensation. This study sheds light on a real effect of regional GDP growth targets based on the unique Chinese political-economic setting.

Can stakeholders’ attention to innovation promote corporate innovation?

PurposeGiven the significance of innovation in enabling firms to maintain a long-term competitive edge and secure excess profits, this paper aims to investigate whether and how stakeholders’ attention to innovation (SATI) influences corporate innovation.Design/methodology/approachThis paper introduces a novel variable, SATI, which is achieved by segmenting stakeholders’ attention into two categories: attention to innovation and attention to other facets, using textual analysis methods. Subsequently, this paper empirically examines the influence of SATI on corporate innovation.FindingsThis paper finds that SATI positively affects corporate innovation input, and the result remains true after addressing possible endogeneity issues using instrumental variable regression. Furthermore, the positive effect of SATI on corporate innovation is stronger in firms facing greater financing constraints, thus verifying the financing constraints hypothesis. The positive effect is also stronger in firms with lower risk-taking levels, thus confirming the innovation failure tolerance hypothesis. Further analysis suggests that SATI increases both corporate innovation output and efficiency, thus ruling out the catering hypothesis.Originality/valueThis paper highlights the importance of SATI in driving corporate innovation. It enriches the literature on the repercussions of stakeholders’ attention and determinants of corporate innovation. In addition, it provides practical suggestions for further implementing China’s national innovation-driven development strategy.

How does common ownership affect corporate innovation after succession in Chinese family firms? A perspective on value cocreation

How does common ownership affect corporate innovation after succession in Chinese family firms? A perspective on value cocreation

Does intergenerational mobility affect corporate innovation? Evidence from Chinese manufacturing enterprises

Integrating efficiency with dynamic fairness is crucial for advancing economic development. This study aims to enhance the analytical framework guiding firm behavior by introducing intergenerational mobility. Using data from Chinese listed enterprises, we empirically investigate the impact of intergenerational mobility on corporate innovation levels. The results show that higher regional intergenerational mobility promotes both quantity and quality of corporate innovation. Compensation incentive, Human capital allocation and social trust are identified as transmission mechanisms. Furthermore, the positive effect of high intergenerational mobility on innovation output is more pronounced in local private enterprises than in state-owned ones. Additionally, our study reveals that formal institutions have substitutive relationship with intergenerational mobility in affecting corporate innovation. These findings contribute to a nuanced theoretical understanding of opportunity equality at the micro-level and provide empirical evidence supporting China’s sustainable economic development.

Research on the Impact of Supply Chain Concentration, and Financial Flexibility on Corporate Innovation: An Empirical Study in the New Energy Industry

With the gradual formation of an international consensus on carbon peaking and neutrality, the new energy industry is a key focus for future development. Still, the industry also suffers from a fiercely competitive market environment. Therefore, the innovation performance of enterprises is crucial. This paper analyzes the impact of supply chain relationships and financial flexibility on corporate innovation from a resource-based viewpoint. Moreover, several variables are introduced to explore the optimal combination of innovation strategies. In the empirical part of the study, the study selects the panel data of listed companies in Chinas new energy industry. The fuzzy set qualitative comparative analysis approach investigates how supply chain concentration, and financial flexibility affect corporate innovation. The study shows that: corporate cash is the main internal resource for R&D, industrial clusters facilitate the acquisition of external resources, and the configuration of the two can promote corporate innovation; debt and supply chain risk inhibit corporate.

A good neighbor, a found treasure: Do local neighbors affect corporate innovation?

AbstractThis study examines whether local neighbors operating in different industries affect corporate innovation engagement. Based on mimetic isomorphism theory, we find that innovative local neighbors can serve as a social reference group for corporations to build legitimacy and guide corporations' mimetic innovation behavior. Our results remain robust after controlling for endogeneity by employing various methods. More importantly, our mechanism analysis indicates that local government activism is crucial to promote mimetic innovation behavior in a region. Our study provides a valid mechanism to explain the emergence of highly innovative cities that agglomerate across industry boundaries. Our research makes two key contributions to the literature. First, our study contributes to the literature on corporate innovation clustering by adding new evidence of the mimetic effects in corporate innovation across industries. Different from the industrial peer effects in innovation, which address the industrial peer effects through the lenses of competitiveness and information dissemination, our results highlight that mimetic isomorphism explains the regional effects of mimicry on corporate innovation. We find strong evidence indicating that firms imitate the innovation behaviors of their local neighbors, and this tendency is most plausibly explained by the incentives associated with acquiring legitimacy. Second, our findings clarify the mimetic behaviors in corporate innovation by extending the theory of mimetic isomorphism. We link local government activism to mimetic isomorphism from the psychological and sociological perspectives. In particular, our results indicate that local governments can implement activism through the psychological and sociological mechanisms illustrated in this study. Those “soft” mechanisms initiated by government contribute to a better understanding of the regional effects of mimicry on corporate innovation.

How Do Analysts Affect Corporate Innovation? Evidence from Site Visits

How Do Analysts Affect Corporate Innovation? Evidence from Site Visits

How does climate risk affect corporate innovation? Evidence from China

AbstractThis paper investigates the effects of climate risk on corporate innovation in China. Employing a city‐level climate risk indicator that we constructed and a sample of 21,430 firm‐year observations of Chinese‐listed companies, we find that climate risk is negatively associated with corporate innovation investment and outcome. These results are robust to alternative empirical designs and identifications. Our mechanism analyses reveal that climate risk impedes corporate innovation by motivating firms to increase cash holdings as financial reserves. Additional analyses suggest that the adverse impact of climate risk on corporate innovation is more pronounced for high‐tech firms, and less salient for firms with higher financial constraints and female Chairperson or CEO. Furthermore, the decrease in corporate innovation due to climate risk can lead to a reduction in firm value. These findings contribute to the existing literature on climate risk and corporate innovation and inform regulators and listed firms concerning climate risk.

How the executive pay gap affects corporate innovation

ABSTRACT There is already a wealth of literature on how the design of salary for technicians affects corporate innovation, but the influential mechanisms of executive incentives on corporate innovation have not received sufficient attention. As a source of motivation for executives to promote innovation, the design of pay gap plays an important role in improving firm’s innovation performance. In this research, we attempt to examine the impact of the executive team’s internal pay gap on corporate innovation using data from Chinese A-share listed companies from 2016 to 2021. The results are as follows. Firstly, pay gap among executives can significantly enhance a firm’s innovation performance. Secondly, the executive pay gap promotes innovation through the stability of executive team members. Thirdly, executive compensation stickiness moderates pay gap and firm’s innovation positively. This paper reveals the mechanism by which the executive pay gap affects corporate innovation and suggests that companies should formulate effective compensation incentive mechanisms to stimulate executives’ enthusiasm for innovative projects, and strengthen executive support and promotion of corporate innovation.

Managerial long‐termism and corporate innovation: Evidence from China through text mining approaches

AbstractAdhering to long‐termism is essential for sustaining and promoting corporate innovation in the face of future uncertainty. In this study, we use machine learning and text analysis methods to construct a proxy variable for managerial long‐termism and explore how managerial long‐termism affects corporate innovation using a sample of 13,117 firm‐year observations from 2010 to 2020 in China. We find managerial long‐termism has a positive effect on corporate innovation, which is mainly achieved by mitigating agency problems. The positive effect of managerial long‐termism on corporate innovation is more pronounced when an enterprise faces stronger economic policy uncertainty and has more slack resources. Additional analysis shows that managerial long‐termism accelerates exploratory innovation and contributes to the high‐quality development of enterprises. Our findings advance research on long‐termism in corporate governance and generate meaningful insights into the antecedents of corporate innovation from the perspective of time preference.

Does knowledge of digital technology affect corporate innovation? Evidence from CEOs with digital technology backgrounds in China

ABSTRACT Global economies are increasingly focusing on digital technology to break through the conventional innovation development pattern. This study examines the degree to which CEOs with digital technology backgrounds affect corporate innovation. In a broader sense, it investigates the significance of digital technology in the innovation transformation of global economies. We find that CEOs with digital technology backgrounds significantly enhance corporate innovation performance. Mechanistic tests indicate that CEOs with digital technology backgrounds promote corporate innovation performance through a stronger willingness for digital transformation, higher level of internal control management and focus on fostering a stronger culture of collaboration compared to CEOs without digital technology backgrounds. Additionally, CEOs with digital technology backgrounds are better at promoting corporate innovation within state-owned enterprises and enterprises that do not receive industrial policy support. Further analysis suggests that CEOs have a greater impact on corporate innovation when the macroeconomic environment is compatible with their personal traits. Therefore, for companies competing in the field of digital technology, talent construction is vital to gaining a competitive advantage.