Home purchase restriction, real estate investment, and corporate innovation

• Published in: Frontiers of business research in China 2020, Vol.14 (4), p.519-539, Article 24
• Main Authors: Kuang, Weida, Chen, Changyu, Wang, Qilin
• Format: Article
• Language: English
• Subjects: Accounting/Auditing; Business and Management; Business Finance; Corporate innovation; Home purchase restriction (HPR) expectation; Houses; Human Resource Management; Marketing; Nonreal estate firms; Organization; R&D; Real estate companies; Real estate investment; Research & development
• ISSN: 1673-7326; 1673-7431
• DOI: 10.1186/s11782-020-00091-5

It is ubiquitous for non-real estate firms to conduct real estate business in China. Home purchase restriction (HPR) affects corporate innovation by dampening the real estate investment of non-real estate firms. The extant literature has examined the impact of HPR on corporate innovation, but it has not focused on the expectation of HPR and the endogeneity problem. Employing a dataset of 1830 listed non-real estate firms over the period 2009–2016, this research explores the expectation of HPR on corporate innovation based on the motivations for real estate investment in non-real estate firms. We demonstrate that HPR facilitates the enhancement of research and development (R&D) investment in non-real estate listed firms by hindering real estate investment, particularly for non-high-tech firms. The effects of HPR arrive at the crest in the third implementation year and remain steady thereafter. The real estate investment of non-real estate firms rebounds and the R&D investment declines along with the cancellation of HPR. Tackling the selection bias and endogeneity problems, the baseline results are also robust. Hence, HPR should serve as a long-term vehicle to improving corporate innovation, in addition to preventing housing speculation.