Political Instability, Access to Private Debt, and Innovation Investment in China

32 Pages Posted: 21 Aug 2016

See all articles by Douglas J. Cumming

Douglas J. Cumming

Florida Atlantic University

Oliver M. Rui

China Europe International Business School (CEIBS)

Yiping Wu

Shanghai University of Finance and Economics

Multiple version iconThere are 2 versions of this paper

Date Written: August 19, 2016

Abstract

We provide evidence from China that access to loans positively affects the probability that a firm will invest in innovation. However, the positive effect of private debt on innovation investment is significantly moderated by political instability. The cost of political instability on innovation is less severe when the entrepreneur has political connections to party leaders. Furthermore, we show that political connections increase the probability that an entrepreneur has access to direct governmental support for innovation investment. These findings are more pronounced for technology intensive industries.

Keywords: Political Instability; Private Debt; Innovation; China

JEL Classification: G21, G28, O30

Suggested Citation

Cumming, Douglas J. and Rui, Oliver M. and Wu, Yiping, Political Instability, Access to Private Debt, and Innovation Investment in China (August 19, 2016). Emerging Markets Review, Forthcoming, Available at SSRN: https://ssrn.com/abstract=2826810

Douglas J. Cumming

Florida Atlantic University ( email )

777 Glades Rd
Boca Raton, FL 33431
United States

HOME PAGE: http://booksite.elsevier.com/9780124095373/

Oliver M. Rui

China Europe International Business School (CEIBS) ( email )

699 Hong Feng Road
Pudong
Shanghai 201206
China
86-21-28905618 (Phone)
86-21-28905620 (Fax)

HOME PAGE: http://https://www.ceibs.edu/rui-oliver

Yiping Wu (Contact Author)

Shanghai University of Finance and Economics ( email )

Shanghai
China

HOME PAGE: http://spea.shufe.edu.cn/jsp/sh_edu/browser/2.jsp?name=2013000180&identity=80

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