Examining the Performance Implications of Innovation Investment in Core Industries of the Digital Economy: A Threshold Analysis of Excess Cash Holding Level

Huaguo Li () and Wenxiu Hu
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Huaguo Li: Xi’an University of Technology
Wenxiu Hu: Xi’an University of Technology

Journal of the Knowledge Economy, 2024, vol. 15, issue 4, No 117, 18739-18769

Abstract: Abstract Innovation and quality improvement in China’s main sectors drive its digital economy. This study examines the economic effects of innovation investment in certain businesses, specifically cash and R&D spending increases. We use the panel threshold regression model on 478 listed businesses in digital economy key industries from 2013 to 2022. Our study uses R&D investment intensity and excess cash holdings as threshold factors and found interesting results. As the threshold variable, R&D investment intensity has a three-threshold effect, demonstrating a W-shaped association with firm performance. The dynamics of R&D investment change from negative to positive and vice versa, highlighting its complexity. Second, using excess cash holding levels as the threshold variable shows a range that positively affects R&D intensity and current-period enterprise performance, with a greater effect on future performance. However, much currency dampens this link. Regional and industry-specific tests reveal threshold effect variations. As it progresses, the study matches knowledge economy demands. This research illuminates the complex relationship between R&D investment, excess cash holdings, and firm success in China’s digital economy, aiding strategic decision-making. The recommended enterprise and government interventions support innovation and sustainable development in the digital core industries in a knowledge-driven economy.

Keywords: Innovation; Digital economy; R&D investment; Excess cash holdings; Panel threshold regression model; Economic effects (search for similar items in EconPapers)
Date: 2024
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DOI: 10.1007/s13132-024-01871-7

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