Nonlinear Effect of Financial Efficiency and Financial Competition on Heterogeneous Firm R&D

Abstract

Green finance focuses on the coherence and sustainability of finance. This chapter studies the influence of financial scale, financial efficiency, and financial competition on enterprise R&D investment, which includes the different side effects of financial quantity and quality, and to some extent reflects the coherence and sustainability of financial development. The authors use manufacturing company data, regional financial quantity, and quality indicators from 2005 to 2007. The results reveal that (1) less developed area enterprises, or low- and medium-technology enterprises, a large amount of financial quantity expansion cannot support the R&D activities of high innovation efficiency, and (2) financial efficiency and financial competition have a nonlinear effect on firm R&D. Low financial efficiency leads to a lack of efficient firm R&D financial development. The results of the chapter reveal a crucial approach to improve the effect of financial inefficiency on firm R&D by changing from merely expanding financial quantity to improving quality instead.