Independent Directors and Enterprise Technology Innovation

Based on the data of A-share listed companies from 1996 to 2016, the paper uses the panel double fixed model to study the impact of the company’s transition to a larger proportion of independent directors on corporate innovation behavior. It is concluded that the increase in the proportion of independent directors of the company can make the number of patents of the company significant. Increased conclusions. Compared with invention patents, non-invention patent applications have increased more, and the increase in independent directors has prompted managers to pay more attention to the benefits and risks of innovation. At the same time, based on the DID model, this paper analyzes the impact of the minimum independent director policy ratio on the company’s innovation activities. The study finds that the minimum independent director ratio policy allows private companies to lower their minimum proportion of companies and increase their strategic innovation behavior, instead of seeking exploration and breakthroughs in new technologies.


Introduction
Independent directors are an important part of the design of modern corporate governance mechanisms. Their role is to reduce the interests of small and medium-sized shareholders and improve the decision-making ability of the board of directors by introducing independent third parties that have no relationship with the company's existing stakeholders (Yiming Hu and Songlian Tang, 2008) [1]. The board of directors plays an important role in corporate governance. The board of directors is responsible for supervising managers and making recommendations for them, which can effectively reduce the agency costs caused by the separation of ownership and control. Some scholars previously believed that independent directors are different from other directors of the company, and independent directors may not have much to do with corporate governance.
However, independent directors are better suited to perform this role: they can reliably limit management by supervising and punishing managers (Fama and Jensen, 1983;Williamson, 1983) [2] [3].
From the perspective of the duties of independent directors, the increase in the number of independent directors may result in more patents; if the company's performance is not good, independent directors are more likely to terminate the manager's position (Weisbach, 1988) [4], this threat to the company manager to work hard Power is provided (Stiglitz and Weiss, 1983) [5]. The more supervision of independent directors, the more it can alleviate the company's agency problems, such as the abuse of corporate resources, and promote the effective use of scarce resources; As a company manager, it is better to take actions that are close to the interests of shareholders (Harris and Raviv, 1978;Holmstrom, 1979; Holm-strom and Milgrom, 1991) [6] [7] [8]. When the company receives more supervision and performance requirements, the company manager will focus on quantifiable results, such as more patents. Eventually, the number of patents will increase, to meet the company's performance requirements for managers.
In view of this, this paper attempts to analyze the technological innovation of enterprises from the reform of independent director system. This paper uses the panel fixed effect and the empirical method of double difference to study: 1) It is found that the company's transition to a more independent board of directors can significantly increase the number of patent applications of the company; the number of non-invention patent applications has increased more than the invention patents, and the increase of independent directors has made managers pay more attention to the improvement in performance, especially the benefits and risks of innovation. 2) This paper uses the DID model to study that the government has issued the "Guiding Opinions on Establishing an Independent Director System for Listed Companies". The law requires that the independent directors of listed companies account for no less than one-third of the independent directors. The influence of the director's proportional policy on the company's innovation activities has resulted in a minimum independent director ratio policy. Significantly, the company with a lower percentage than the lowest proportion of private companies increases their strategic innovation behavior rather than seeking new technologies. Exploration and breakthroughs reflect the decline in the number of invention patent applications.
The contribution of this paper lies in: First, after research on previous literatures, this paper is the first study to analyze enterprise technology innovation from the perspective of independent director system reform, and the existing li-X. C. Hu, X. H. Sun American Journal of Industrial and Business Management terature mostly focuses on the research of listed company performance, stock market risk and investment, and other issues. Secondly, using the policy exogenous shock of the independent director system reform, the panel data double difference model is constructed to study the impact of the independent director system reform of listed companies on enterprise technology innovation, and effectively alleviate the endogenous problems of listed companies in China. Third, on the basis of the double difference model, the listed companies are divided into state-owned enterprises and private enterprises to observe the impact of independent director system reform on them. Finally, the research in this paper can provide new perspectives and new suggestions for understanding and analyzing the policy effects of the reform of the independent director system of listed companies in China.

1) Institutional background
Prior to 2001, companies listed in China were free to choose whether to hire independent directors for the company. In order to improve the governance of listed companies, after 2001, the China Securities Regulatory Commission required listed companies to hire independent directors to improve the company's governance; at the same time, the CSRC also stipulated that independent directors of listed companies should be independent when the company's major matters are decided. Directors must express independent opinions to the board of directors or shareholders meeting. The types of independent opinions generally include the following categories: consent; reservations; objections; failure to express opinions. However, at this time, the CSRC did not explicitly stipulate that the opinions of independent directors in the company's general meeting of shareholders and the board of directors must be disclosed to the outside world.
In June 2003, the "Guiding Opinions on Establishing Independent Director System for Listed Companies" promulgated by the CSRC required at least one-third of the board members of listed companies to be independent directors, that is, the ratio of the number of independent directors to the number of board members must be More than 1/3. For listed companies, whether the completely exogenous independent director policy can strengthen the supervision of independent directors and improve the company's governance.
In view of the improvement of China's relevant legal system for independent directors, the role of independent directors in improving corporate governance will certainly be strengthened; this paper focuses on the impact of the independent director system on corporate governance oversight, and then studies the impact on corporate technological innovation; Companies that go to the board of more independent directors will increase their exploration of previously successful areas of expertise. An in-depth exploration of the transformation of the

1) Model design
To analyze how to transition to an independent board to influence innovative search, we follow the literature on corporate governance and innovation, and study independent directors on R&D spending, companies. The impact of innovation, the model is as follows.

a) Independent directors and R&D expenditure
The R&D expenditure and the ratio of independent directors to the number of board members establish the following panel fixed-effect regression equation: If H1 is assumed to be true, then the coefficient of 1 β is positive.
b) Independent directors and enterprise innovation ( ) The article uses the number of patent applications to measure the innovation intensity of listed companies, If H2 is assumed to be true, then the coefficient of ( ) The substantive innovation regression equation is as follows: If H3 is assumed to be true, then the coefficient of 1 β is positive; If H4 is assumed to be true, then the coefficient of 1 α is positive. If the condition H5 is assumed to be true, then

2) Independent directors and research and development expenditures
After the Hausmann test, the original hypothesis was rejected. This paper uses the panel fixing effect to test the model of the article. The variables explained in Table 2 are log (R&D). All explanatory variables lag behind a period. The model assesses potential changes in R&D investment after the reform of the independent director system, which may drive subsequent changes in patent applications. Model (a) illustrates that from the industry classification, the proportion of independent directors seems to have nothing to do with the level of R&D    Table 3 shows the return of the total number of patents of independent directors and listed companies. Model (a), model (b), and model (d) show that the independent director system reform is significantly positive for the total number of patents at a level of 1%, regardless of industry type or individual company, Type (c) is significantly positive at the 5% level. It can be seen that after the patent rate application for removing the time trend, the independent director has a promotion effect on the patent, and the more independent directors, the more attention they attach to the patent application. From the regression results, the transition from independent enterprises to more independent directors can increase the number of patent applications of the company, strengthen the company's ability to innovate, and prevent the development of enterprises from stagnating, thus improving the performance of listed companies.

3) Independent directors and technological innovation
From the above table, we can see that independent directors have a very rapid impact on innovation. The effect on innovation is obvious only after one year of transition to independent directors. In general, the impact of any measure on innovation is slow, because research takes time; projects must be funded, and American Journal of Industrial and Business Management staff allocation and execution take a lot of time, after which any successful results must be patented, a new R&D strategy. It is impossible to have this effect immediately. A more reasonable explanation is that the company's patent application process has changed. In particular, the company's engineers and lawyers have paid more attention to patent inventions in the company's existing portfolio.
The company's employees attach importance to patents from supervised role Of the independent directors. suggestions, or reduce innovations because they fear independent boards to limit future flexibility. As a result, strategic innovations are less risky and can generate greater benefits in the short term than inventive patents. Thus, the results of Table 4 and Table 5 are in accordance with Hypothesis 5.

Further Research Design
The    strategic innovation patents increased; strategic patents and substantive patents, the risk of innovation is smaller, and the gains obtained are greater. In the short term, the number of strategic innovation applications can make the company's performance look better and make the company's market valuation higher. Because the coefficient of policy effectiveness is not significant, we have not found that transitioning to an independent board affects innovation efficiency (Cohen, Dieher and Malloy, 2013) [13]. Then, in order to further explain the empirical results, we need to group return the listed companies, and divide them into private listed companies and state-owned listed companies through the actual controllers of listed companies, and obtain the following empirical regression results ( Table 7).
The sample data of (1), (4) and (7) in Table 7 are from the full sample. The sample data of (2), (5) and (8) in Table 7 are from state-owned enterprises. (3), (6) and (9) sample data from private companies. The empirical results in Table   7 show that the policy effect coefficient of strategic innovation of private enterprises is significantly positive. In 2003, the minimum proportion of independent directors policy was more inclined to increase the strategic innovation of listed private companies with less than the minimum proportion of private independent directors in 2002. The number of patent applications has increased the importance that independent directors attach to the patented inventions of private enterprises. This shows that the policy makes managers more inclined to strategic innovation rather than seeking to explore and break through new technologies, seeking fewer invention patent projects and avoiding new technologies.
The independent directors in state-owned enterprises are not significant at all for patent inventions, indicating that state-owned enterprises are protected by the national government policy, and the phenomenon of rent-seeking between enterprise executives and the government has caused the company's development to stagnate, not only disregarding the new technology. Innovation and the original results are not new, may lead to the formation of "zombie enterprises", and may eventually be annexed by other companies. Since the sample of private enterprises is smaller than that of state-owned enterprises, the total sample data is similar to the sample data of state-owned enterprises, which is also the inadequacy of empirical research in this paper.

Summary
This paper uses the patent data of A-share listed companies from 1999 to 2016, definition of the nature of innovation shows that, in terms of strategic innovation and substantive innovation, the board of directors whose independent transition to more independent directors is more inclined to let the CEO carry out strategic innovation and obtain innovative income. Third, the paper draws from the DID model that the minimum independent director proportional policy allows private companies to increase their strategic innovation behavior relative to the lowest proportion of companies, rather than seeking new technology exploration and breakthrough.