Economics at your fingertips  

Housing price appreciation, investment opportunity, and firm innovation: Evidence from China

Zhao Rong (), Wenchun Wang and Qiang Gong

Journal of Housing Economics, 2016, vol. 33, issue C, 34-58

Abstract: The impact of housing price appreciation on firm innovation may be negative. Housing price appreciation generates real estate investment opportunities with high returns, making manufacturing firms more likely to diversify into the real estate industry. With limited resources, once investing in real estate development, these firms will invest less in innovation. By examining manufacturing firms in China for the period 1999–2007, we provide evidence by finding that housing price appreciation negatively influenced manufacturing firms’ innovation propensities. Additionally, we further explore the underlying mechanism by examining the likelihood of listed firms’ diversification into the real estate industry, and how the diversification influenced their patenting. Consistent with the investment opportunity hypothesis, we find that (1) housing price appreciation stimulated firms to enter the real estate industry, and a firm's invention patenting was negatively influenced subsequent to its real estate diversification; (2) the negative effect was more pronounced where housing price growth rates were higher.

Keywords: Housing price appreciation; Firm innovation; Diversification; China (search for similar items in EconPapers)
JEL-codes: O30 P20 R30 (search for similar items in EconPapers)
Date: 2016
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (8) Track citations by RSS feed

Downloads: (external link)
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link:

DOI: 10.1016/j.jhe.2016.04.002

Access Statistics for this article

Journal of Housing Economics is currently edited by H. O. Pollakowski

More articles in Journal of Housing Economics from Elsevier
Bibliographic data for series maintained by Haili He ().

Page updated 2020-08-06
Handle: RePEc:eee:jhouse:v:33:y:2016:i:c:p:34-58