The Impact of Technological Innovation on Corporate Performance: Evidence From the Communication and Cultural Industry in China

China’s communication and cultural industry is an emerging industry at the primary stage of its development. Nowadays, the public’s increasing demand for cultural products, coupled with the strong support from the state and the government for the communication and cultural industry, have provided huge room for the development of this industry. However, some listed companies in the communication and cultural industry have not kept up with the constantly changing market and have not invested heavily in R&D and technological innovation, resulting in widespread product homogeneity and poor corporate performance. This paper empirically tests the impact of technological innovation on corporate performance of 56 listed companies from 2007 to 2016 in the communication and cultural industry. Along with variables that proxy technological innovation, variables that proxy solvency, profitability, operational capability, development capability, social responsibility, and shareholder indicators are included in the regression as explanatory variables. Empirical results show that technological innovation has a positive impact on the corporate performance of listed companies in the communication and cultural industry.

Regarding the financial factors affecting corporate performance, Deng (2009) selected 12 listed companies in the Shanghai and Shenzhen Stock Exchange in 2008, and used principal component analysis and factor analysis to evaluate the corporate performance of the 12 listed companies. Financial factors are included in the regression for the assessment of their impact on corporate performance. The results found that these companies yield significantly different corporate performance outcomes, which may be due to differentiation of the main business income's contribution to total profit, or geographical advantage. Different conclusions were reached in previous studies on the impact of capital structure. Liu (2011) selected 18 companies in the communication and cultural industry and studied the relationship between capital structure and corporate performance. The study showed that the asset-liability ratio is negatively correlated with the return on equity (ROE) and that the optimal liability interval maximizes ROE. The study then concluded with the suggestion of expanding financing to improve corporate performance. Similarly, Yue (2012) investigated 14 companies in the communication and cultural industry listed on Shanghai and Shenzhen A-shares and overseas. Empirical results found that the asset-liability ratio is negatively correlated with corporate performance. However, Yan and Gao (2011) found that the asset-liability ratio has a positive impact on the corporate performance of companies in the communication and cultural industry [9] . For the publishing segment, previous literature mostly examines the impact of financial factors on corporate performance, and different results were found. Huang (2012) evaluated the corporate performance of 10 listed companies in the publishing segment. The study found that, first of all, from the perspective of each company and according to the four aspects of performance evaluation, the development of these 10 companies entails several advantages. Overall, the financial risk and profitability in performance evaluation are relatively stable. Moreover, from the perspective of the industry, the growth capability of the publishing segment is relatively good, but there is still a huge gap between the publishing segment and other segments in the industry in terms of profitability and operational capability. On the contrary, Wang and Xie (2013) evaluated the corporate performance of 10 listed companies in the publishing segment in 2012. They found that profitability yields improve in the stock market, while growth capability however does not feature good performance. cultural industry has positively promoted China's economic development. He also proposed that in order to help the communication and cultural industry to further develop, companies in this industry need to pay attention to the introduction and cultivation of talents in order to stay abreast of the rapid developments in technology. Yu and Pan (2013) hypothesized that the proportion of executives in a company is an important part of the corporate culture and is an intermediate force of the company, which, in turn, has a positive impact on the corporate performance of companies in the communication and cultural industry. The study examined the data of the executives of listed companies in the Shanghai and Shenzhen stock exchange from 2011 to 2012, and found that the average salary paid to senior executives and the background of the senior management team are two factors which have a positive effect on the corporate performance of companies in the communication and cultural industry. However, the management style of the senior management team has no significant impact on corporate performance. Sun and Chen (2013) used a non-balanced panel data set of listed companies from 2002 to 2011 in the communication and cultural industry, and studied the overall impact of mechanisms both internal and governmental, such as the relationship in ownership structure, executive incentives, and corporate performance. The results showed that executive incentives are positively significantly related to companies' corporate performance, while ownership structure is negatively significantly correlated with companies' corporate performance. Wang and Yang (2013) evaluated the technical efficiency of 27 companies in the communication and cultural industry from 2006 to 2010 based on stochastic frontier analysis (SFA). The results showed that the overall technical efficiency of the communication and cultural industry is still low, at 0.66, but it is nevertheless on the rise. Liu et al. (2015) collected data on financial capabilities and the external institutional environment of listed companies in the communication and cultural industry from 2008 to 2013, and they studied the impact of governmental subsidies on companies' corporate performance. Empirical evidence showed that government subsidies are positively correlated with corporate performance, but they are not significant.
With the development of the times, the performance measurement system has undergone significant development by adding in more indicators. In terms of the measurement structure of financial capabilities, four factors, i.e., profitability, operational capability, solvency, and development capability form the basis of performance measurement. The balanced scorecard adds three other dimensions. Although the range of factors in the performance measurement system is broadened, the correlation of financial factors and non-financial factors is low, and the applicability of this evaluation is weak. Rather than using a single indicator, empirical analysis has also widely utilized comprehensive methods for evaluating corporate performance. Most of the evaluation methods using data envelopment analysis (DEA) are, however, for example, not accurate. Since the selection of input variables and output variables is subjective, no consistent technical efficiency can be calculated. Moreover, although the impact of financial factors like capital structure and non-financial factors like the proportion of technicians have been examined in previous research, few studies have included both financial factors and non-financial factors in the empirical analysis. In order to further explore the influencing factors of corporate performance by companies in the communication and cultural industry, this paper investigates the impact of both financial factors and non-financial factors, with a focus on technological innovation.

Data and Empirical Analysis
Based on stakeholder theory [17] and principal-agent theory [18] , this paper selects 17 indicators which reflect financial capabilities (solvency, profitability, operational capability, development capability) and the non-financial aspects (technology innovation, social responsibility, shareholder indicators) of China's communication and cultural industry according to the characteristics of light assets and the emphasis on creative development. Four variables that proxy technological innovation and 13 other variables are empirically assessed. Variable description is summarized in Table  1 below. Intellectual property is particularly important in a company's intangible assets. Calculated as the ratio of intangible assets to total assets. Proportion of Technicians (TECH) Developing products for customer needs is a necessary condition for promoting the development of the communication industry. Calculated as the ratio of the number of technicians to the total number of employees. Proportion of Staff with College Degrees (COLL) Innovation brought about by the introduction of talents has diversified the communication industry. Calculated as the ratio of the number of staff with college degrees to the total number of employees. R&D Density (RD) The ratio of total asset growth from one year to the total assets at the beginning of the year.

Current Liabilities Ratio (CLR)
The ratio of current liabilities to total liabilities. The higher the ratio, the stronger the dependence on short-term funds. Asset Liabilities Ratio (ALR) The proportion of the total assets of listed companies through borrowing and financing. Calculated as the ratio of total assets to total liabilities.

Profit Margin of Sales (PMOS)
Comparison between the net profit and sales through the sale of products.

Quick Ratio (QUICKR)
The ratio of quick assets to current liabilities. The ability of liquidating current liabilities, which can be measured against the ability to repay short-term debt. Total Asset Turnover (TURN) The ratio of net profit to average total assets for a certain period of time. It reflects the use of all assets by a company. Accounts Receivable Turnover (RECEI) The turnover rate of accounts receivable and the management efficiency of a company. The higher the turnover rate, the faster the receipt of the account; on the contrary, it affects the solvency of a company. Calculated as the ratio of sales revenue to the average of accounts receivable. Inventory Turnover (STOCK) The ratio of cost of goods sold to the average balance of stocks, the average balance of stocks = (inventory at the beginning of the period + inventory at the end of the period) /2.

Operating Income Growth Rate (OPERATEG)
The change in a company's operating income in a year compared with the that of a previous year. The ratio of the change in operating income to the total operating income of the previous year. Net Profit Growth Rate (PROG) Current net profit minus the net profit of the previous period, divided by the net profit of the previous period. The greater the value, the stronger the profitability of the company in the industry.

Growth of Total Assets (ASSG)
The growth of a company's total assets in a period. Calculated as the ratio of total asset growth in a year to total assets at the beginning of the year. Government Subsidies (GOV) The ratio of government subsidies to net profits. The greater the proportion, the more reliant is a company's net profit on the government. Income Tax (TAX) The ratio of income tax to net profit.

Stock Concentration (STOCKE)
A quantitative indicator that reflects whether or not the equity of a company is concentrated. Calculated as the ratio of the number of shares held by the largest shareholder to the total number of shares.
The data are gathered from the database WIND. By the end of 2016, there were a total of 60 listed companies in the communication and cultural industry in China. Four companies were excluded from the data set due to missing values. Hence, the data set consists of 56 listed companies from 2007 to 2016, giving a total observation of 560. Descriptive statistics are shown in Table 2. In terms of solvency, the current debt ratio is much higher than the asset-liability ratio, indicating that the liabilities of some listed companies in the communication and cultural industry are almost made up of current debt ratios. Regarding profitability, the overall value of earnings per share is low, and the dispersion is large and polarized. Some companies in the communication and cultural industry have suffered losses for a long time.
communication and cultural industry is on the rise. The average value of the proportion of staff with college degrees is 33.28%, indicating that the overall reasonable quality of the staff.
Among other non-financial factors, the operational capability of companies in the communication and cultural industry is weak, as the overall asset management quality, cash flow turnover, and inventory turnover are all low. In terms of development capability, operating income growth rate, net profit growth rate, and total asset growth rate, these are all characterized by the huge gap between minimum value and maximum value, indicating that the future development potential of listed companies of different segments of China's communication and cultural industry is quite different, and the development prospects of some segments can become better. Regarding social responsibility, the maximum value of government subsidies as a net profit ratio is as high as 98%. Furthermore, the average ratio of income tax to net profit is close to 10%, implying that the communication and cultural industry is overly dependent on government subsidies, resulting in a high net profit. In terms of equity structure, the concentration of equity in China's communication and cultural industry has a high value close to 23%.
The regression function, ideally, would be expressed in the following form: where α is the intercept, , i(1,2, … 17) is a coefficient parameter, and ε is the error term.
In order to avoid spurious regression, the unit root test is first performed to test for stationarity. The regression results and robustness check are shown in Table 3. Regression 1 is OLS that controls heteroskedasticity. Regression 2 shows the panel correction error model (PCSE). Regression 3 is pooled OLS that controls heteroskedasticity. Regression 4 is an asymptotic fixed effect model that controls heteroscedasticity. Regression 5 is a fixed effect model that controls heteroskedasticity. To that extent, this paper interprets the result of Regression 5.  Note: ***, **, * denotes significant at 1%, 5%, 10% significance level, respectively.
It can be seen from the regression results that a positive correlation exists between the intangible asset ratio and EPS, but it is however not significant. Companies in the communication and cultural industry have high-quality intellectual property rights that have little effect on improving profitability. They also need to use this value to create sustainable wealth. Besides, a positive correlation exists between the proportion of technicians and EPS, and it is significant at a significance level of 5%. The communication and cultural industry requires continuous promotion of creativity in order to use existing intellectual property to create more and more wealth. Listed companies should pay attention to the cultivation of professionals because they can create value. Moreover, a negative correlation exists between the proportion of staff with college degrees and EPS, and it is significant at a significance level of 1%. The reason for this negative relationship is that the demand for products in the communication and cultural industry has gradually increased in recent years. As a result, companies have needed to hire more staff to sell products, and most sales staff have college degrees, which is a human resource misallocation, resulting in a negative impact on corporate performance. Furthermore, a positive correlation is observable between R&D density and EPS, and its level of significance stands at 1%. Companies in the communication and cultural industry are actively investing in R&D, improving R&D capabilities, and developing products that satisfy customers' ever-changing preferences. All of these can be beneficial to companies.
In terms of operational capabilities, a positive correlation exists between the total asset turnover rate and EPS, with a significance level of 1%. Companies in the communication and cultural industry can find out the weakness of their own assets through the analysis of this index, so that they can actively improve their efforts and improve utilization. The accounts receivable turnover rate is positively related with EPS, with a significance of 5%. Inventory turnover is also positively related with EPS, with a significance of 1%. It shows that a company can further improve its operational capability by increasing or improving its inventory turnover to increase its liquidity.
Among financial factors, operating income (year-on-year growth rate) is positively correlated with EPS, but not significant. Net profit (year-on-year growth rate), furthermore, is positively correlated with EPS, and it has a significance of 1%. Companies in the communication and cultural industry can effectively understand their development and growth capabilities through the analysis of net profit, and also increase their profitability at the stage of strong growth. The variable total assets (year-on-year growth rate) are positively correlated with EPS, with a significance of 10%.
Meanwhile, a negative correlation exists between government subsidies as a percentage of net profit and EPS, standing at 10%. Companies in the communication and cultural industry, to a certain extent, rely on a portion of their profits, because of government subsidies, which have a negative social impact. Income tax as a percentage of net profit is also found to be negatively related with EPS, with a significance level of 5%. It shows that government tax subsidies also cause a certain negative influence on company turnover. This, however, is because companies make use of government subsidies to falsify financial statements, so that their real profits are questioned. Stock concentration and EPS are positively related (significant at 1% significance level). It shows that the current shareholding structure of the communication and cultural industry enables shareholders to make reasonable and non-one-sided decisions that have a positive impact on listed companies.

Conclusion and Policy Implications
This paper investigates the impact of technological innovation on the corporate performance of companies in the communication and cultural industry. Utilizing a data set of 56 listed companies in the communication and cultural industry spanning from 2007 to 2016, both financial factors and non-financial factors are included in the regression. This paper controls financial factors (solvency, profitability, operational capability, development capability) and non-financial factors (social responsibility and shareholder indicators) for the purpose of examining the relationship between technological innovation and corporate performance. The following conclusions can be reached.
First of all, technological innovation, in general, is found to have a positive impact on the corporate performance of listed companies in China's communication and cultural industry. In terms of intangible assets and human resources, companies need to skillfully use technological innovation combined with intellectual property rights and optimal employment and allocation of human resources to gain a competitive advantage, create continuous value and wealth, and improve corporate performance. R&D is very important for the future development of the communication and cultural industry. Consumers' demand for communication and cultural products is no longer satisfied by traditional media such as newspapers, magazines, and broadcasts. It follows then that companies should increase R&D and develop information media. Updating traditional communication and cultural products is the inevitable path for the future development of companies in the communication and cultural industry. Apart from that, they need to develop appropriate development plans for their own conditions, design unique and attractive cultural products, and thus enhance corporate value. Other factors such as solvency, profitability, operational capability, development capability, ownership structure, and social responsibility are all important factors influencing the corporate performance of companies in the communication and cultural industry.
Based on the above conclusions, the following policy implications are proposed.
Given the significant positive correlation between EPS and R&D density and proportion of technicians, companies in the communication and cultural industry should invest more in the development of products within their capabilities. At this stage, the level of R&D investment in China's communication and cultural industry is not satisfactory. The tendency toward homogenization of communication and cultural products is a serious one and the industry as a whole lacks creativity, which leads to companies lacking their own distinct advantages. Companies in the communication and cultural industry should pursue the development of current technology, use virtual reality, digital networks and other emerging technologies to upgrade their original traditional business, create original and distinctive cultural products, and stimulate consumers' desire to consume. In addition, they also need to focus on professionalism and improve the training of personnel. Effective recruitment, retention, and incentive mechanisms can promote the creative ability of companies so that they can keep up with the pace of the times, and create a continuous and sustainable flow of wealth from existing intellectual property.
Given that solvency, operational capability, development capability, ownership structure and social responsibility are all important factors influencing the corporate performance of companies in the communication and cultural industry, they should rationalize the reduction of the current debt ratio and increase the proportion of long-term liabilities to achieve the aim of optimizing the capital structure, reducing the instability of funding sources, avoiding the increase of financial risks, and stabilizing the solvency and operational capacity. They can also open up other market channels and obtain new potential projects which can improve their development capabilities and profitability. In addition, companies in the communication and cultural industry can establish a diversified and balanced equity structure or establish a shareholder supervisory organization. This is done so as to optimize the adjustment of the shareholding structure in the development process, and effectively avoid having the largest shareholder solely holding a large proportion. With the strong support from the government, companies in the communication and cultural industry tend to have abundant funds. If the allocated subsidies are effectively and rationally utilized, more value can be created both for society and for companies' own well-being, rather than being used for falsification. Similarly, whilst remaining socially constrained, companies themselves must establish a sound management system and build up a foundation for sustainable development.