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Nonlinear Effect of Financial Efficiency and Financial Competition on Heterogeneous Firm R&D: A Study on the Combined Perspective of Financial Quantity Expansion and Quality Development

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  • Yang Gao

    (School of Business, Dalian University of Technology, Panjin 124221, China)

  • Yu Wang

    (School of Business, Dalian University of Technology, Panjin 124221, China)

  • Chien-Chi Chu

    (Department of Finance, Business School, Shantou University, Shantou 515063, China
    Research Institute for Guangdong-Taiwan Business Cooperation, Shantou University, Shantou 515063, China)

  • Sang-Bing Tsai

    (Zhongshan Institute, University of Electronic Science and Technology, Zhongshan 528400, China)

  • Xiaomin Du

    (Department of Economic Management, Yingkou Institute of Technology, Yingkou 115014, China)

  • Quan Chen

    (Zhongshan Institute, University of Electronic Science and Technology, Zhongshan 528400, China)

Abstract

Manufacturing firm data and district financial quantity and quality indicators for 2005–2007 combined with heterogeneous firm characteristics were used with a threshold panel to study the effect of financial inefficiency on firm R&D and the financial boundaries of efficiency improvement. The results show that: (1) extensive financial quantity expansion cannot support high innovation efficiency R&D (Research and Development) activities in private enterprises, low- and medium-technology enterprises, and underdeveloped area enterprises, as it causes financial inefficiency problems and a shortage of R&D inputs; and (2) financial efficiency and financial competition have nonlinear effects on firm R&D. Financial inefficiency and either low or excessive financial competition result in a lack of highly efficient firm R&D. Only improvements in financial efficiency and moderate competition can significantly promote firm R&D. The results of this study reveal an important way to improve the influence of financial inefficiency on firm R&D by moving away from simply expanding financial quantity to promoting quality instead.

Suggested Citation

  • Yang Gao & Yu Wang & Chien-Chi Chu & Sang-Bing Tsai & Xiaomin Du & Quan Chen, 2018. "Nonlinear Effect of Financial Efficiency and Financial Competition on Heterogeneous Firm R&D: A Study on the Combined Perspective of Financial Quantity Expansion and Quality Development," Sustainability, MDPI, vol. 10(5), pages 1-15, May.
    • Handle: RePEc:gam:jsusta:v:10:y:2018:i:5:p:1383-:d:143940
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