The Effect of Financial Constraints on Firm Innovation: An Empirical Study Based on the Panel Data Model

Abstract

Abstract: In order to explore the relationship between financial constraints and firm innovation, this paper employs a threshold panel data model to analyze the effect of financial constraints on firms’ innovation level and efficiency based on A-share listed companies in China. Moreover, this paper analyzes the effect of enterprise property and internal control on the relationship between financing constraints and firm innovation. The empirical results clearly show: (1) financial constraints are significantly negatively related to firms’ innovation level, while positively related to the innovation efficiency; (2) firms’ property and their internal control degree play an important role in the relationship between financial constraints and firms’ innovation level and efficiency. Financing constraints impose more significant negative effects on state-owned enterprises’ innovation level, while more significant positive effects on private enterprises’ innovation efficiency. For state-owned and private enterprises, internal control is able to strengthen both the negative effects of financing constraints on innovation level and the positive effects on innovation efficiency.

Key words: financing constraint, innovation level, innovation efficiency, panel data model, firms' internal control

Zeng Yuan, Chen Xiaojun, Huang Anqiang. The Effect of Financial Constraints on Firm Innovation: An Empirical Study Based on the Panel Data Model[J]. Management Review, 2024, 36(11): 110-118.

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