Manufacturing R&D investment efficiency and financing constraints: evidence from China

Enhancing the level of Research and Development (R&D) investment by China’s manufacturing enterprises and thus improving their independent innovation capabilities are the core to enhance the country’s industrial competitiveness. This research thus explores the threshold effect of financing constraints on manufacturing R&D investment from the perspective of financing constraints which impact such investment. We first define the related concepts of financing constraints and R&D investment and then discuss the theoretical basis for forming those constraints. The research data sample covers 68 A-share listed manufacturing companies from 2007 to 2016, and we apply the panel threshold model to conduct empirical research. The results show that financing constraints have a negative impact on the R&D investment of listed manufacturing companies, and that there is a non-linear relationship between threshold effects. When the asset-liability ratio is less than or equal to 0.4142, the financing constraint has a small negative impact on the R&D investment of these firms; when the asset-liability ratio is greater than 0.4142, the financing constraint has a greater negative impact on their R&D investment. Based on the findings, we propose relevant policy recommendations.