|
|
|
| Bank Competition, Innovation Resource Allocation, and Firm Innovation Output: Empirical Evidence from the China Industry Census Database |
| DAI Jing, YANG Zheng, LIU Guanchun, XU Chuanhua
|
School of Finance, Hubei University of Economics;
School of Management, Wuhan Textile University;
School of Public Economics & Administration, Shanghai University of Finance and Economics;
School of Finance, Hubei University of Economics |
|
|
|
Abstract There is emerging evidence that debt finance is an important source of capital for firms engaged in innovation. In recent years, with the deregulation of bank entry, China's banking system has witnessed rapid changes in market competition. This paper provides a detailed analysis and establishes causal links between bank competition and innovation in the Chinese context.
Our first analysis concerns how bank competition has changed in China. We capture commercial city bank branch data and construct the Herfindahl-Hirschman Index (HHI) to measure competition levels. We find that the banking market structure has witnessed rapid changes with large variations across cities and time. This provides a good opportunity to test the interaction of firm innovation and changes in bank competition. We then match patent information from the State Intellectual Property Office (SIPO) to firm-level data from the China Industry Census (CIC). This allows us to trace the level of bank competition firms face and how firms respond in terms of new patent applications. We expect firm innovation to increase following increased bank competition because firms can take advantage of the greater supply of finance.
Second, we examine two possible channels to explain this result. We test whether entry to innovation and the innovation input of incumbent firms responds to increased bank competition. We expect that bank competition relaxes entry barriers for new firms and spurs greater innovation among incumbents. Moreover, we look at the differences in these two possible channels across different types of firms. We expect small and medium-sized non-state owned firms to take advantage of the improved credit conditions to finance innovative projects.
Third, to clarify whether bank competition affects the allocation of firm innovation investment, we test the relationship between bank competition and the distribution of firm innovation output and input. We expect that the distribution of innovation input and output will tighten.
Our paper advances two strands of the literature. First, it extends the literature on the real effects of financial structure on innovation in China by focusing on the impact of bank competition on firm innovation. Second, our paper contributes to the emerging literature on innovation by showing that bank competition allows firms entry to bank credit and encourages incumbent firms to invest more in innovation.
We utilize and compile three datasets for our empirical analysis, including all Chinese bank branch information, CIC firm-level data on R&D expenditure and other firm-level control variables, and SIPO patent data for firms.
This paper has three main findings. First, we find that the overall positive effects of bank competition on innovation output are strong and robust. Second, we explore the possible underlying mechanisms and show that bank competition expands access to credit for firms, which allow entrant firms to begin innovative projects and incumbent firms to invest more in innovation. Third, we find these mechanisms more prominent for non-state-owned enterprises and for small and medium enterprises. These results indicate that the growth in overall innovation output is partly due to the allocation in the supply of credit to small and medium-sized and non-state-owned enterprises. All of these results suggest that a reduction in the regulation of bank entry is can promote firm innovation in China. Bank competition improves the distribution of innovation resources among firms, thus more firms are able to secure bank financing for innovative projects.
Our paper adds to the literature on financial development and economic growth in the following ways. First, we find that bank competition expands access to credit for potential firms, which relaxes their financial constraints, allowing firms entry and access to innovative projects and incumbent firms to invest more in innovation. Second, we extend the literature by examining the heterogeneous effects of bank competition on different types of firms, and find that the growth in overall innovation output is mainly due to the output of small and medium-sized non-state owned firms. Third, this paper provides a microeconomic foundation for the literature on the finance-innovation nexus in China.
In future research, it will be important to understand how this rapid change in the banking sector affects technological progress in China, such as in the relationship between the banking system and disruptive innovation. This will be of great value in understanding the transformation of China's economic structure.
|
|
Received: 05 February 2018
Published: 09 March 2020
|
|
|
|
|
| [1] |
边文龙、沈艳和沈明高,2017,《银行业竞争度、政策激励与中小企业贷款——来自14省90县金融机构的证据》,《金融研究》第1期,第114~129页。
|
| [2] |
蔡竞和董艳,2016,《银行业竞争与企业创新——来自中国工业企业的经验证据》,《金融研究》第11期,第96~111页。
|
| [3] |
方芳和蔡卫星,2016,《银行业竞争与企业成长:来自工业企业的经验证据》,《管理世界》第7期,第63~75页。
|
| [4] |
简泽、干春晖和余典范,2013,《银行部门的市场化、信贷配置与工业重构》,《经济研究》第5期,第112~127页。
|
| [5] |
江飞涛,2017,《中国产业组织政策的缺陷与调整》,《学习与探索》第8期,第118~126页。
|
| [6] |
姜付秀、蔡文婧、蔡欣妮和李行天,2019,《银行竞争的微观效应: 来自融资约束的经验证据》,《经济研究》第6期,第72~88页。
|
| [7] |
刘贯春、陈登科和丰超,2017,《最低工资标准的资源错配效应及其作用机制分析》,《中国工业经济》第7期,第62~80页。
|
| [8] |
林毅夫和孙希芳,2008,《银行业结构与经济增长》,《经济研究》第9期,第31~45页。
|
| [9] |
巫岑、黎文飞和唐清泉,等,2016,《银企关系、银行业竞争与民营企业研发投资》,《财贸经济》第1期,第74~91页。
|
| [10] |
吴晗和贾润崧,2016,《银行业结构如何促进行业资源的有效配置——基于异质性企业进入退出视角的分析》,《当代经济科学》第 38期第5卷,第77~88页。
|
| [11] |
尹志超、钱龙和吴雨,2015,《银企关系、银行业竞争与中小企业借贷成本》,《金融研究》第1期,第134~149页。
|
| [12] |
张杰、郑文平和新夫,2017,《中国的银行管制放松、结构性竞争和企业创新》,《中国工业经济》第10期,第118~136页。
|
| [13] |
张璇、李子健和李春涛,2019,《银行业竞争、融资约束与企业创新——来自中国工业企业的证据》,《金融研究》第10期,第98~116页。
|
| [14] |
张雪兰和龚元,2017,《银行业市场结构与产业增长:基于资源再配置与技术进步效应的探析》,《财贸经济》第38期第10卷,第99~114页。
|
| [15] |
张一林、林毅夫和龚强,2019,《企业规模、银行规模与最优银行业结构》,《管理世界》第3期,第31~47+206页。
|
| [16] |
Acemoglu D, Aghion P and Zilibotti F., 2006, “Distance to Frontier, Selection, and Economic Growth ”, Journal of the European Economic Association, 4(1):37~74.
|
| [17] |
Aghion, P. and Griffith, R., 2007, “Competition and Growth. Reconciling Theory and Evidence”, Journal of Economics, 90(1):111~116.
|
| [18] |
Amore, M D, C. Schneider and A.Žaldokas, 2013, “Credit Supply and Corporate Innovation”, Journal of Financial Economics, 109(3):835~855.
|
| [19] |
Chava, S, Nanda, K. Vikram and S C.Xiao,2013, “Lending to Innovative Firms: The Role of Lender Expertise and Control Rights”, SSRN Electronic Journal.
|
| [20] |
Chong, T,L. Lu and S. Ongena, 2013, “Does Bank competition Alleviate or Worsen Credit Constraints Faced by Small and Medium Enterprises？ Evidence from China”, Journal of Banking and Finance, 37( 9):3412~3424.
|
| [21] |
He, Z. L.,T. W. Tong, Y. Zhang, 2018, “Constructing a Chinese Patent Database of Listed Firms in China: Descriptions, Lessons, and Insights”. Journal of Economics & Management Strategy, 27:579~606.
|
| [22] |
Hottenrott, H, B.Peters, 2009, “Innovative Capability and Financing Constraints for Innovation: More Money, More Innovation？”, Review of Economics and Statistics, 94:9~081.
|
| [23] |
Hsieh, C.T and P.Klenow, 2009, “Misallocation and Manufacturing TFP in China and India”, Quarterly Journal of Economics, 124(4):1403~1448.
|
| [24] |
Kerr, W. R and R. Nanda, 2014, “Financing Innovation”, Annual Review of Financial Economics, 7(1):445~462.
|
| [25] |
Love, I. and M. S. M.Pería, 2012, “How Bank Competition Affects Firms' Access to Finance”, World Bank Economic Review, 29(3):413~448.
|
| [26] |
Moll, 2014, “Productivity Losses from Financial Frictions: Can Self-Financing Undo Capital Misallocation”, American Economic Review, 104(10):3186~3221.
|
| [27] |
Petersen, M. A. and R. G.Rajan, 1995, “The Effect of Credit Market Competition on Lending Relationships”, Quarterly Journal of Economics, 110(2):407~443.
|
| [28] |
Shang,Jin Wei, Zhuan Xie and Xiaobo Zhang, 2017, “From “Made in China” to “Innovated in China”: Necessity, Prospect, and Challenges”, NBER Working Paper 22854.
|
|
|
|
