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Political instability, access to private debt, and innovation investment in China

Author

Listed:
  • Cumming, Douglas
  • Rui, Oliver
  • Wu, Yiping

Abstract

We provide evidence from China that access to loans positively affects the probability that a firm will invest in innovation. However, the positive effect of private debt on innovation investment is significantly moderated by political instability. The cost of political instability on innovation is less severe when the entrepreneur has political connections to party leaders. Furthermore, we show that political connections increase the probability that an entrepreneur has access to direct governmental support for innovation investment. These findings are more pronounced for technology intensive industries.

Suggested Citation

  • Cumming, Douglas & Rui, Oliver & Wu, Yiping, 2016. "Political instability, access to private debt, and innovation investment in China," Emerging Markets Review, Elsevier, vol. 29(C), pages 68-81.
    • Handle: RePEc:eee:ememar:v:29:y:2016:i:c:p:68-81
    DOI: 10.1016/j.ememar.2016.08.013
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    More about this item

    Keywords

    Political instability; Private debt; Innovation; China;
    All these keywords.

    JEL classification:

    • G21 - Financial Economics - - Financial Institutions and Services - - - Banks; Other Depository Institutions; Micro Finance Institutions; Mortgages
    • G28 - Financial Economics - - Financial Institutions and Services - - - Government Policy and Regulation
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

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