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Financing the R&D investment of Chinese firms: state-owned versus private firms

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  • Yun Jung Kim
  • Mei Quan

Abstract

We investigate the effect of financing constraints on the R&D investment of Chinese listed firms for the period 2010–2020. The sample is divided into state-owned versus private firms, which differ substantially in R&D patterns, financial structures, and other characteristics. We find that, in both state-owned and private firms, internal cash flow significantly affects R&D investment, suggesting the presence of binding financing constraints. Both state-owned and private firms actively manage liquid assets to smooth R&D spending. Debt finance is insignificant for both state-owned and private firms. New stock issues have a significant positive effect on R&D in private firms only, not in state-owned firms. Given that the contribution of private firms to aggregate R&D is increasing, stable stock market conditions may have an important aggregate impact on R&D.

Suggested Citation

  • Yun Jung Kim & Mei Quan, 2024. "Financing the R&D investment of Chinese firms: state-owned versus private firms," Applied Economics, Taylor & Francis Journals, vol. 56(12), pages 1347-1362, March.
    • Handle: RePEc:taf:applec:v:56:y:2024:i:12:p:1347-1362
    DOI: 10.1080/00036846.2023.2176449
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