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Cross-border investment and corporate innovation: Evidence from the Chinese market

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  • Beladi, Hamid
  • Deng, Jie
  • Hu, May

Abstract

This paper explores the motivation and features of industrial enterprises investing in real estate in China. Using the A-share listed companies from 2005 to 2019, we investigate the change in the dominant position of two competing effects, namely “credit relief effect” vs “resource reset effect” of real estate investment under different conditions. The empirical results show that both the likelihood and level of entering real estate sector for industrial enterprises restrain the input and output of corporate innovation. The developed region strengthens resource replacement effect of cross-border investment on corporate innovation. Resource replacement effect is more significant in developed regions, whereas the resource replacement effect is partly offset by the credit relief effect in undeveloped regions. The findings are robust after controlling for potential endogeneity concerns. The results contribute to enhancing the innovation vitality of micro subjects and preventing China's systemic financial risks under the environment of supply-side structural reform.

Suggested Citation

  • Beladi, Hamid & Deng, Jie & Hu, May, 2021. "Cross-border investment and corporate innovation: Evidence from the Chinese market," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 75(C).
    • Handle: RePEc:eee:intfin:v:75:y:2021:i:c:s1042443121001566
    DOI: 10.1016/j.intfin.2021.101446
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    4. Cincinelli, Peter & Pellini, Elisabetta & Urga, Giovanni, 2022. "Systemic risk in the Chinese financial system: A panel Granger causality analysis," International Review of Financial Analysis, Elsevier, vol. 82(C).

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