R&D, FINANCIAL CONSTRAINTS AND PRODUCTIVITY: EVIDENCE FROM THE CHINESE INDUSTRIAL ENTERPRISES

Abstract

Using a unique dataset from National Bureau of Statistics of China, we estimate the total factor productivity (TFP) of enterprise and explore the relationship among research and development expenditures (R&D), financial constraints and TFP. We find that: First, R&D has a significantly lagged effect on the improvement of TFP. Second, the R&D fails to improve the contemporaneous productivity and negatively impacts on contemporaneous TFP. Third, financial constraints significantly reduce the improvement effect of R&D on TFP, and this kind of marginal effect has significant difference between state-owned enterprises (SOEs) and private enterprises (Non-SOEs). This study offers important policy implications by showing that: First, firms can obtain long-term benefits from continuous R&D expenditures. Second, the government should release appropriate policies to ease financial constraints, especially for the Non-SOEs.

THE EFFECTS OF R&D AND ITS DIFFERENT TYPES ON FIRM PRODUCTIVITY: EVIDENCE FROM CHINA

“…By analyzing datasets of unlisted Chinese manufacturing firms for the period 2002-2007, Xu et al (2020 found a significant laggard effect of R&D on productivity improvement. Dai et al (2022) estimated the output elasticity of R&D using the firm-year data of technological enterprises in Shanghai from 2009 to 2017, and observed that the impact of internal R&D stock on productivity ranged from 0.094 to 0.123.…”