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Monetary Policy, Product Market Competition, and Firm Innovation: Evidence from Chinese Listed Companies

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  • Tingxi Wang
  • Xiaowei Yang

Abstract

Based on product market competition, this paper studies the heterogeneity of monetary policy in promoting firms’ innovation. Specifically, taking 1420 listed companies from 2013 to 2018 as samples, this paper estimates the impact of monetary policy and product market competition on R&D investment density, and the moderating effect of competition on policy effect by using the fixed effect model. This study shows that a loose monetary policy shock relaxes firms’ financing constraints and increases their R&D investment capacity. In response, firms facing greater competitive pressures in product markets choose to increase their R&D investment density, while firms with less competitive pressures lack incentives for R&D investment.

Suggested Citation

  • Tingxi Wang & Xiaowei Yang, 2022. "Monetary Policy, Product Market Competition, and Firm Innovation: Evidence from Chinese Listed Companies," International Journal of Economics and Finance, Canadian Center of Science and Education, vol. 14(5), pages 1-26, May.
    • Handle: RePEc:ibn:ijefaa:v:14:y:2022:i:5:p:26
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    References listed on IDEAS

    as
    1. Klaus M. Schmidt, 1997. "Managerial Incentives and Product Market Competition," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 64(2), pages 191-213.
    2. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September.
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    Cited by:

    1. Han Hu & Shihui Yang & Lin Zeng & Xuesi Zhang, 2024. "U.S.–China trade conflicts and R&D investment: evidence from the BIS entity lists," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-15, December.

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    More about this item

    JEL classification:

    • R00 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General - - - General
    • Z0 - Other Special Topics - - General

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