Transformations  in
Business & Economics

INTERNATIONAL CAPITAL INFLOWS AND FIRM R&D INVESTMENT⁹
Wengang Li, Liping Li, Beibei Hu

ABSTRACT: This study analyzes if international capital inflow promotes firm R&D investment through the mediating effect of external financing channels. First, using financial data of listed companies in 68 countries from 1999 to 2011, this study constructs a model to determine the mediating effect of external financing channels on international capital flow for prompting firm R&D investment. In developed countries, according to a study on debt financing, equity financing, commercial credit financing, and other exogenous financing channels, international capital flows through equity financing to promote firms’ R&D. Equity financing plays a significant mediating effect; the robustness of the mediation effect is further confirmed in the conclusion. The international capital inflow of developing countries does not have a significant effect in promoting domestic firms’ R&D investment, and external financing channels do not have a mediating effect.

KEYWORDS:  R&D, international capital inflow, external financing channel, mediating effect.

JEL classification:  F21, F30, O32.

⁹Acknowledgments:  The research is financially supported by the Ministry of Education of Humanities and Social Science Project (20YJC790043).