The Effect of Financing on Firm Innovation: Multiple Case Studies on Chinese Manufacturing Enterprises

摘要

This article investigates the effects of financing on innovation through multiple case studies of Chinese manufacturers: M&G, Haier, SAIC Motor, and Sifang. Although financing enables firms to access more capital and nonfinancial resources that can fuel innovation in technology, management, cultural, and business models, it also forces firms to adhere to stricter disclosure requirements and some myopic incentives that may constrain innovation. We find a complex and dynamic relationship between financing and innovation. As for technology innovation, the quality of internal innovation declines after financing, and firms experience a drop in both the patent growth rate and the R&D/asset ratio. However, firms acquire external innovation with their additional money in hand, so the quantity of inventions increases. The impact of financing on management, cultural, and business model innovation is positive. Our analysis reveals that financing changes firm strategies in pursuing innovation.