Study on the Impact of Internal and External Governance Characteristics on Corporate R&D Investment-Based on China GEM Listed Companies

Abstract

Researching how different aspects of corporate governance affect R&D spending is both theoretically and practically relevant. Businesses in the high technology sector have been in the spotlight recently due to their status as icons of innovation. Modern Chinese high-tech businesses face intense competition in order to stay afloat and grow. One way they are adapting to this environment is by focusing their efforts on improving their own competitiveness through in-house innovation. Yet, domestic and international academics have given little attention to the connection between company internal and external governance and R&D investment activities, leading them to contradictory findings. The influence of internal and external governance on businesses is too complicated, with both good and negative consequences, and the impact route of corporate governance on enterprises cannot be reduced to a single variable for measurement. For this reason, it is important to investigate the following questions in the context of China's current economic transition: i. does corporate governance affect corporate R&D investment? ii. what the inner mechanism is behind the impact of corporate internal and external governance on R&D investment activities? iii. what is the relationship between corporate internal governance and R&D investment activities? This paper proposes relevant assumptions after summarising and analysing the research conclusions of other scholars and sorts out missing data based on the data of the annual reports of China GEM manufacturing listed companies from 2011 to 2020 in order to measure the specific impact of corporate governance and industry competition on enterprise R&D investment and the regulatory role of industry competition on the relationship between corporate governance and R&D investment. The author conducts an optimistic analysis and draws the following conclusions: First, from an external perspective, the intensity of industry competition has a major impact on the R&D investment decisions of firms, and vice versa. Second, from within the corporation, state-holding enterprises have greater leeway to invest in research and development than non-holding enterprises do, and the merger of the chairman and general manager roles can boost R&D spending. The third point is that the link between state-holding, position combination, and R&D investment will not be regulated by industry competition.