The Crowding-Out Effect of Real Estate Markets on Corporate Innovation: Evidence from China

Real estate bubbles can increase collateral value, thus relaxing financial constraints, which might spur innovation. However, they might also crowd out R&D expenditures, thus stifling corporate innovation. This paper shows that real estate prices negatively affect both corporate R&D and patents in China, suggesting a strong crowding out effect. We further provide suggestive evidence that managerial myopia might partly account for the crowding out effect. Our study illustrates the innovation cost of a booming real estate market.

Keywords: Real Estate Markets, Innovation, Crowding Out Effect, Managerial Myopia, China

JEL Classification: G31, R30, O31, P20, D22

Suggested Citation: Suggested Citation

Shi, Jing and Wang, Yongxiang and Wu, Weixing and zhong, tony, The Crowding-Out Effect of Real Estate Markets on Corporate Innovation: Evidence from China (August 30, 2016). Asian Finance Association (AsianFA) 2016 Conference, Available at SSRN: https://ssrn.com/abstract=2720314 or http://dx.doi.org/10.2139/ssrn.2720314