Finance, institutions, and innovation activities in China

Go Yano and Maho Shiraishi

Economic Systems, 2020, vol. 44, issue 4

Abstract: Using novel firm-level micro-panel data in China from 2000 to 2009 and data on institutional factors, we study which funding sources effectively finance firm innovation activities in China and how the effectiveness of funding sources varies according to the quality of institutions. We show that institutional factors impact the effectiveness of each funding source in different ways. First, when property rights are better protected against the risk of expropriation by the government, internal financing from net profit—namely, the reinvestment of profit—is more important in financing firm innovation activities. Second, as contracts are enforced more reliably, trade credit finance and bank finance play larger roles in financing firm innovation activities.

Keywords: China; Finance; Innovation activities; Institutions (search for similar items in EconPapers)
JEL-codes: G31 O16 O31 O53 P34 (search for similar items in EconPapers)
Date: 2020
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (14)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:ecosys:v:44:y:2020:i:4:s0939362520301539

DOI: 10.1016/j.ecosys.2020.100835

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