Regional capital flow and capital allocation efficiency of high‐tech enterprises in China

• Published date: 01 October 2023
• Author: Ke Xu,Jian Li,Chengxuan Geng
• Date: 01 October 2023
• DOI: http://doi.org/10.1002/jcaf.22637

Received:  November  Accepted:  April 

DOI: ./jcaf.

RESEARCH ARTICLE

Regional capital flow and capital allocation efficiency of

high-tech enterprises in China

Ke Xu1,2Jian Li3Chengxuan Geng2

School of Economics and Management,

Changzhou Institute of Technology,

Changzhou, China

School of Economics and Management,

Nanjing University of Aeronautics and

Astronautics, Nanjing, China

Business School, Nanjing Normal

University, Nanjing, China

Correspondence

Jian Li, Business School, Nanjing Normal

University, Nanjing, China.

Email: lijian@njnu.edu.cn

Funding information

National Social Science Fund of China,

Grant/AwardNumber: BGL

Abstract

From the perspective of capital flow,the study analyses the preference and spatial

difference of capital flow of high-tech enterprises, and uses the Super-SBM-DEA

model to analyze the capital allocation efficiency. On this basis, the influence

of capital flow of financial institutions, capital market, government, and for-

eign capital flow on capital allocation efficiency is further analyzed. We found

the influence of different channels of capital flow on the capital allocation effi-

ciency is heterogeneous. Finally, suggestions are made to optimize capital flow

and improve the capital allocation efficiency of high-tech enterprises in different

regions.

KEYWORDS

capital allocation efficiency, capital flow, high-tech enterprises

JEL CLASSIFICATION

G, G, O

1 INTRODUCTION

Since the reform and opening-up, China’s rapid eco-

nomic development has mainly benefitted from low-cost

labor, resources, and environment. Now China’s eco-

nomic development has entered a new stage, and only

innovation-driven development can provide strong impe-

tus for China’s sustainable development. As early as ,

the report to the th National Congress of the Communist

Party of China called for an innovation-driven develop-

ment strategy. Under the influence of the strategy, local

governments are accelerating the cultivation of high-tech

enterprises.

From  to , the number of high-tech enterprises

in China has been increasing, and the annual growth rate

has been maintained at more than %, especially during

the th Five-Year Plan period, the number growth rate

has been more than %. In , the number of high-

tech enterprises in China increased by % year-on-year,

achieving total industrial output value of . trillion yuan,

with a year-on-year growth rate of .%, and total profit of

. trillion yuan, with a year-on-year growth rate of .%.

High-tech enterprises are the most critical innovation sub-

jects, with Research and Development (R&D) intensity

generally exceeding %, which is significantly higher than

the average level of industrial enterprises above the desig-

nated size in China. In the background of implementing

the innovation-driven development strategy and building

an innovative country,playing the leading role of high-tech

enterprises has become significant.

The primary issue in the development of enterprises is

financing. Capital is profit-seeking, and the difference in

the rate of return on capital between different regions will

cause capital to instinctively flow from low rate of return

to high rate of return region. Studying how to promote

the capital flow of financial intermediary capital, capital

market’s capital, government capital and foreign capital

between different regions of high-tech enterprises is rele-

vant to optimize the allocation of capital and inject new

impetus into China’s economic development.

J Corp Account Finance. ;:–. ©  Wiley Periodicals LLC. 73wileyonlinelibrary.com/journal/jcaf

74 XU  .

This study analyses the relationship between regional

capital flow and capital allocation efficiency in China’s

high-tech enterprises and determines which form of cap-

ital flow helps improve the efficiency of capital allocation.

The influence of different types of capital flows on capi-

tal allocation efficiency in three regions in China is further

analyzed to provide intellectual support for optimizing

regional capital flow and promoting capital allocation

efficiency further.

The remainder of the paper is organized as follows: In

Section , we review existing research, and in Section ,we

define the core concepts and analyze the influence of dif-

ferent types of capital flow on capital allocation efficiency

of high-tech enterprises. Weconstruct the empirical analy-

sis model, which is described in Section , and discuss our

results in Section . Finally,we summarize our conclusions

and propose policy recommendations in Section .

2LITERATURE REVIEW

Global research on capital flow mainly started from the

s and s, most of which focused on the measure-

ment of capital flow and relationship between regional

capital flow and economic development. There are direct

and indirect methods to measure capital flow in many

countries. Feldstein and Horioka () believed that if

capital could not flow freely, local savings could only be

invested in the local region, so regional savings and invest-

ment should be highly correlated. The model they used

was called F-H model and many scholars used this indica-

tor to measure regional capital flows. Boyreau-debray and

Wei ( ) used the F-H model to analyze the capital liq-

uidity of China from  to  and found that it wasvery

low. Inadequate to calculate the directionand scale of cap -

ital flow, F-H model is an indirect measurement method.

Alfaro et al. () adopted direct measurement of capital

flows between countries through indicators such as capi-

tal account balance, international capital assistance, and

government debt flow.

In China, capital flow can be measured in the follow-

ing ways. First, many scholars use F-H model, such as

Feng ()aswellasSunandRen(). Second is calcu-

lating capital flow using the theory of national economic

accounting. Wang and Fan (), and Hu and Wu ()

deduced the scale of capital flow by measuring the reverse

scale of regional goods flow. Third is calculating the total

capital flow from different channels respectively. Guo and

Wang ( ) analyzed the scale of capital flow from six

channels including fixed asset investment, government

budget fund, bank fund, private fund, foreign capital, and

other capital flow channels. Huang and Yang ()mea-

sured the scale of capital flow from five aspects: fiscal

revenue and expenditure, fixed asset investment, foreign

direct investment (FDI), outbound investment and bank

deposit, and loan balance. Fourth is using gravity model

to measure capital flow.The gravity model originated from

Newton’s lawof universal gravitation in the s and was

later applied to social sciences. Liu () applied grav-

ity model to study the flow of financial capital. Liu and

Wang ( )constructed gravity models of R&D personnel

and capital respectively to analyze their impact on regional

innovation capability.

Most studies focus on the relationship between regional

capital flow and economic development. Bekaert and Har-

vey () found that increase in equity flows is associated

with higher per capita economic growth. Bailliu ()

pointed out that private capital flows play an impor-

tant role in economic growth for economies in which

the banking sector has reached a certain level of devel-

opment. Mishra et al. () analyzed the benefits and

costs of increased private capital flows to developing

countries’ economies. Adekunle () found that the

relationship between foreign capital flows and Nigeria’s

economic growth is both linear and non-linear.Hasan et al.

() found that banking regulation mitigates the adverse

impact of capital flow volatility on economic growth. Most

Chinese scholars believe that the increase of capital inflow

will promote economic growth (Cheng & Li, ;Zhou&

Zhong, ; Zou, ). Another research focus area in

China is the impact of regional capital flows on regional

economic disparities. Some scholars believe that capital

flow clearly influences China’s regional economic gap,

sharing a causal relationship to some extent, and their

change trends are highly consistent (Peng & Wu, ).

Conversely, some scholars opine that promoting regional

capital flow will narrow the regional economic gap (Chen

&Fan,;Peng&Wu,; Zhou, ).

Scholars have always focused on problems with cap-

ital allocation. Some research results have been formed

around the measurement, regional differences and influ-

encing factors of capital allocation efficiency. Currently,

the research on the influencing factors of capital alloca-

tion efficiency is from both external and internal aspects.

The external factors originate from financial, political, eco-

nomic, and other environments, while the internal factors

constitute internal control, scale, ownership, management

education level, etc. The regression model is constructed to

analyze each factor’s impact on the capital allocation effi-

ciency. However, few literatures analyze capital allocation

efficiency from the perspective of capital flow. In fact, cap-

ital flow will affect capital allocation through finance (Pan

&Zhang,;Ren&Ni,;Zhao,), foreign capital

(Li et al., ; Zhou, ), government financial capital

(Sun & Guo, ), and other channels. The influence path

and effect from different channels differ.