2019 Jiangsu Young Think Tank Scholar Salon
Expert Reports on ‘Comprehensive Well-off Society and Private Economy’
Deepen the Study of Private Enterprises and Help the Steady Development of Private Enterprises
—How to Ensure the Continuous Innovation of Private Economy
Li Jian Nanjing Normal University
On the afternoon of September 28, 2019, Li Jian, a researcher at the Jiangsu Private Economic Research Base and an associate professor at the Business School of Nanjing Normal University, shared the experience in the private economy education and research work in Room 228 of the Xingmin Building.
Teacher Li Jian first briefly introduced two provincial-level projects on private enterprises' solutions to problems and countermeasures. One was the Going Global Innovation and Development Study of Jiangsu Private Economy during the 13th Five-Year Plan , and the other was Research on the Cost Status and Work Countermeasures of Private Entity Economic Enterprises.
Next, Mr. Li Jian explained how to grasp the idea of “going into practice, approaching practice, extracting problems from practice, and then feeding back academic research”, mainly including two stages.
The first stage of the study is the academic issue caused by the practical problem of “funding difficulties and financing of private enterprises”–how to maintain the innovation continuity of private enterprises, especially small and medium-sized private enterprises? Small and medium-sized private enterprises face strong financing constraints. On the one hand, because small and medium-sized private enterprises are small in scale and it is difficult to provide qualified collateral to reduce loan risks, financial institutions provide limited loan opportunities. On the other hand, external investors cannot obtain real information on innovation, and it is difficult to optimize innovation projects. Inferior assessments result in higher risk premiums and increased external financing costs. Therefore, China's small and medium-sized private enterprises continue to innovate in the face of serious external financing constraints, relying mainly on internal financing. In the case of small and medium-sized private enterprises that are difficult to finance externally, the sources of funds that support their continuous innovation are mainly internal operating funds, that is, their own capital flows. The problem with small and medium-sized private enterprises is that the market is volatile, so the cash flow fluctuates between high and low. Every time the company's cash flow is at a low level, its willingness to invest in innovation tends to decrease.
In response to the research questions at this stage, Teacher Li Jian explained the following two points:
First, technological innovation is a key factor for private enterprises to “going global” for international competition, and an important way for small and medium-sized private enterprises to transform and upgrade to gain competitive advantage. In the past, when companies “ went global ” for international competition, the products were of good quality, but the prices were very low. Cost leadership is the key to obtaining bids on the surface, but in fact the premise of cost leadership is technology shoulder, that is, technological innovation does not require absolute lead in the international market, but it must be guaranteed to reach the world's cutting-edge level.
Second, when the innovation of the enterprise cannot be sustained, interrupted or fell, the consequence is that the “ time of innovation is not intermittent”. Assuming that the total amount of innovation investment in a company has been the same for several years, the innovation effect of long-term sustainable innovation investment is better than the innovation effect without continuous investment and interruption of investment, and it is better than the innovative investment mode of short-term assault.
The research results of Li Jian’s research team at this stage are divided into several perspectives:
The first perspective is the characteristic perspective of the enterprise. Including the business expectation friction of the operating company, the expected performance appraisal effect, and the concentration of corporate equity.
The second perspective is the executive perspective of the company. Including executive compensation, executive shareholding, executive overconfidence, general manager control, and general manager succession.
The third perspective is the external perspective. Including government subsidies, market valuations, and industry market competition in which companies operate.
The second stage studies the social capital and family business innovation input mechanism in intergenerational inheritance, that is, how to ensure tha tthe entrepreneurs of the family business can be confident and continuous innovation investment during the inheritance period, and can overcome the limitation of social emotional wealth, which guarantees The individual's innovative effect ensures that the national innovation-driven strategy can be implemented resolutely and effectively at the individual enterprise level.
Teacher Li Jian said that during the inheritance period, the continuity ofent erprise innovation is more easily interrupted. The main performance is inthe inheritance period. The family enterprises in private enterprises consciously reduce the investment of innovation, even the interruption, and the company is more willing to invest the funds into the projects that are “shortand fast ” and see the performance. The theoretical basis for explaining this phenomenon is “ social emotional wealth theory ” , which means that entrepreneurs in family enterprises tend to choose “short and fast” projects in order to smoothly transfer the enterprises to the successors who want to pass the inheritance period to avoid relative High-risk innovation projects. When the second generation of entrepreneurs are in the upper position, they will still do so in order to consolidate their status, so that they can quickly achieve excellent results in the short term. From the perspective of enterprises, the effect of innovation investment in the inheritance period will be affected; from the perspective of individuals, the innovation of enterprises will be affected, and their competitiveness will decline; from the perspective of the state, if every enterprise does this, then the innovation effect of the private enterprise main body will be greatly reduced, and the innovation in this period will also decline.
For this stage of research, Teacher Li Jian briefly introduced the following two main logical ideas:
First, whether social capital's willingness to innovate under the social emotional wealth can be solved, can it guarantee its innovation investment by accelerating the enterprise's inheritance period. There may be many mechanisms involved in this phase, such as feature performance mechanism, peer effect mechanism, and contract constraint effect mechanism. Second, study the innovation investment mechanism and risk-taking mechanism of social enterprise capital under the leadership of extended social emotional wealth. It is hoped that through the construction of social capital at the macro, industrial and enterprise levels, we can study how we can guarantee more risk of innovation and provide countermeasures to support it. Under the leadership of extended social emotional wealth, we will overcome the problem.
Finally, Mr. Li Jian suggested that when we participate in the practical projectof the tutor, we should further link the practical issues with the existingtheoretical research and deepen the academic theory; and constantly fill thegap between the practical problems and the academic world, truly in practice.Extract questions and then feed back on academic research.