Index of financing constraints, intellectual capital, and total factor productivity in manufacturing enterprises: evidence from China

This study aims to explain the continuous growth of total factor productivity (TFP) despite the significant negative impact of financial constraints. Adopting an intellectual capital (IC) perspective, this study decomposes TFP and incorporates it as a threshold variable to examine how its varying levels influence the relationship between financial constraints and productivity. TFP is estimated using the Olley – Pakes and Levinsohn – Petrin methods, employing panel data sourced from Chinese listed manufacturing firms from 2007 to 2016. A financial constraint index was constructed using a binary logistic regression model based on six financial indicators, including the debt-to-equity ratio. Subsequently, the Hansen threshold panel regression was applied to identify the threshold effects of IC and assess variations in the impact of financial constraints across different knowledge capital intervals. The findings reveal a clear non-linear relationship; the effect of financial constraints on TFP depends significantly on the development stage of knowledge capital. IC mitigates the negative impact of financial constraints only after the critical threshold levels are surpassed. These results offer novel theoretical insights into the industrial life cycle and highlight the stage-specific moderating role of IC in promoting productivity.