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Curse or blessing: National industrial investment fund and corporate R&D in China

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  • Shao, Chuanlin
  • Tao, Yunqing
  • Chen, Dong
  • Ye, Yongwei

Abstract

Using the establishment of the Chinese Integrated Circuit Industry Investment Fund in 2014 as a quasi-natural experiment, this paper identifies the causal effect of national industrial investment fund on corporate R&D by using the difference-in-differences (DID) method. We find that the establishment of national industrial investment fund has a significant positive effect on corporate R&D, which is more pronounced in firms with more serious financing constraints, poorer internal governance, and laxer external supervision. Furthermore, the mechanism tests show that this policy helps alleviate firms’ financial constraints and agency conflict, thereby increasing corporate R&D. Overall, our findings reveal that the national industrial investment fund has positive effects on corporate R&D, which provides fresh insights into the positive effects of industrial policy.

Suggested Citation

  • Shao, Chuanlin & Tao, Yunqing & Chen, Dong & Ye, Yongwei, 2023. "Curse or blessing: National industrial investment fund and corporate R&D in China," Finance Research Letters, Elsevier, vol. 54(C).
    • Handle: RePEc:eee:finlet:v:54:y:2023:i:c:s1544612323000983
    DOI: 10.1016/j.frl.2023.103724
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    Cited by:

    1. Tianbao Zhou & Zhixin Liu & Yingying Xu, 2024. "How do financial variables impact public debt growth in China? An empirical study based on Markov regime-switching model," Papers 2407.02183, arXiv.org.
    2. Gao, Feiyang & Tao, Yunqing & Chen, Dong & Cao, Yuyang, 2023. "Stringent financial regulation and corporate R&D investment: Evidence from a quasi-natural experiment in China," Finance Research Letters, Elsevier, vol. 55(PB).
    3. Li, Beili & Fan, Xu & Li, Jianjiang, 2024. "Natural resource dependence and government-guided social forces participation in R&D investment: An analysis of the resource curse hypothesis," Resources Policy, Elsevier, vol. 89(C).
    4. Li, Xiaofan & Ye, Yongwei & Liu, Zhaoda & Tao, Yunqing & Jiang, Jingjing, 2024. "FinTech and SME’ performance: Evidence from China," Economic Analysis and Policy, Elsevier, vol. 81(C), pages 670-682.

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    More about this item

    Keywords

    National industrial investment fund; Financial constraints; Agency conflict; Corporate R&D;
    All these keywords.

    JEL classification:

    • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies

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