Financing constraints for R&D in China: the role of state ownership

ABSTRACT

We investigate financing constraints for R&D in China. We find that Chinese private firms are financially constrained for R&D, while state-owned enterprises are not. Mature private firms encounter more severe financing constraints for R&D than young private firms. Moreover, the expansion of external financing supply does not relax the financing constraints for R&D faced by private firms.

KEYWORDS:

• Research and development
• financial constraints
• state ownership
• Chinese firms

JEL CLASSIFICATION:

• G32
• O16
• O31

Highlights

• Chinese private firms are financially constrained for R&D, while state owned enterprises are not.

• Mature private firms encounter more severe financing constraints for R&D than young private firms.

• Expansion of external financing supply does not relax the financing constraints for R&D faced by private firms.

Disclosure statement

No potential conflict of interest was reported by the author.

Notes

¹ If the error term follows a firm-specific MA(1) process, instruments dated t-2 are not valid. Therefore, we use only instruments dated t-3 to t-5 if m1 statistics indicate a first-order autocorrelation in the errors.