Relational Patient Capital and Agricultural Technological Innovation: Evidence from Chinese Agricultural Technology Enterprises

1. Introduction

Agricultural technological innovation plays a foundational role in advancing food security, rural development, and the sustainable modernization of agriculture. For agricultural economies, innovation in seeds, precision agricultural machinery, biological breeding, and digital agricultural tools is not only a source of productivity growth, but also an important policy instrument for supporting rural revitalization and sustainable rural development. However, agricultural technological innovation is widely recognized as one of the most capital-intensive and time-consuming forms of innovation. From the development of improved crop varieties and precision agricultural machinery to the commercialization of biological breeding technologies, agricultural innovation usually requires long development cycles and generates returns that are highly delayed and uncertain, because the development, testing, adoption, and diffusion of agricultural technologies often involve substantial time lags and uncertainty in economic returns [1,2]. Such structural features create a fundamental mismatch with conventional financial capital, which tends to impose short investment horizons, strict performance benchmarks, and early exit requirements. As a result, agricultural technology enterprises in China and elsewhere frequently face insufficient R&D investment, commercialization financing gaps, and weak incentives for the diffusion and scaling of novel technologies [3,4]. Recent evidence also suggests that digital finance can materially affect agricultural total factor productivity, highlighting the importance of financial digitalization for agricultural resource allocation and productivity dynamics [5].

The concept of patient capital, which refers to capital that tolerates long investment horizons, high uncertainty, and delayed returns, has gained increasing attention in both policy discourse and academic research as a potential solution to innovation financing gaps [6,7]. In China, this policy logic has been reflected in multiple iterations of the Central Document No. 1. Since 2021, these policy documents have repeatedly emphasized strengthening agricultural science and technology support, accelerating seed industry revitalization, and promoting the development and application of biological breeding technologies [8,9,10]. In parallel, recent national-level policy initiatives have highlighted the importance of expanding patient capital, encouraging investment at earlier stages, and supporting hard technologies with long development cycles and uncertain returns [11]. These policy orientations indicate an increasing recognition that long-duration capital is essential for supporting strategically important innovation activities. From the perspective of agricultural economics and policy, patient capital is not only a financing arrangement, but also a potential policy mechanism to correct market failures in agricultural innovation and promote sustainable agricultural modernization. Related evidence indicates that agricultural fiscal support can strengthen agricultural economic resilience, underscoring the importance of public financial arrangements for long-term agricultural development [12].

Prior studies have primarily conceptualized patient capital from a temporal perspective, emphasizing characteristics such as extended investment horizons, delayed exit decisions, and tolerance for short-term performance fluctuations [13,14]. However, emerging research on long-term investors suggests that patient capital may also involve relational engagement, including strategic support, information provision, and active involvement in firm development [14,15]. However, its relational dimension has received much less attention. We argue that for agricultural technology enterprises, the relational characteristics of patient capital may be equally important. RPC, as conceptualized in this study, refers not only to the long duration of capital commitments, but also to stable shareholder relationships, high-quality post-investment engagement, and the continuous provision of resources, networks, and reputational endorsement by long-term institutional investors. Agricultural innovation is often exposed to natural risks, regulatory complexity, long commercialization chains, and severe information asymmetry between firms and external financiers. Under these conditions, RPC can reduce monitoring costs, lower the risk premium attached to research-stage firms, and sustain managerial commitment to long-cycle R&D projects [16,17]. Understanding this relational dimension is particularly important for sustainable rural development strategies, because the diffusion of agricultural technologies depends not only on scientific discovery, but also on stable financial and institutional support.

Against this background, this paper addresses the following research question: Does RPC promote agricultural technological innovation, and if so, through what mechanisms? To answer this question, we construct a firm-year panel dataset of Chinese agricultural technology enterprises, quantify RPC as the share of long-term institutional and strategic shareholding, and employ a two-way fixed-effects model to estimate its effect on innovation output. Innovation output is measured by log-transformed invention patent applications. We further examine two theoretically motivated mediating channels, namely digital transformation and financing constraints. Digital transformation is examined as an organizational capability channel through which firms reduce information, coordination, and management costs in innovation activities. Financing constraints are examined as a financial channel through which patient capital stabilizes cash flows and supports sustained R&D investment.

To address these research questions, this study constructs a firm-year panel dataset of Chinese agricultural technology enterprises and employs a two-way fixed-effects model to examine the relationship between RPC and agricultural technological innovation. Furthermore, we investigate whether digital transformation and financing constraints represent potential transmission pathways through which RPC may influence innovation performance. Finally, we explore whether the relationship differs across firms with different characteristics and regional innovation environments. By addressing these questions, this study aims to enrich the literature on patient capital, agricultural innovation, and sustainable agricultural development.

Beyond increasing patent output, agricultural technological innovation has broader implications for sustainable agricultural development. Unlike general industrial innovation, sustainability-oriented agricultural innovation may contribute to the transformation of agricultural production systems by improving resource-use efficiency, reducing environmental pressures, and supporting more resilient rural landscapes. For example, innovations in precision agriculture, smart irrigation, agricultural biotechnology, and digital farming systems can optimize the allocation of land, water, and agricultural inputs, thereby promoting more sustainable production patterns. From a territorial perspective, agricultural innovation is increasingly embedded within the interaction among production spaces, living spaces, and ecological spaces. Therefore, understanding how long-term capital support facilitates agricultural innovation is important not only for firm-level competitiveness but also for the broader transition toward sustainable agricultural modernization. Recent research further highlights that agricultural sustainability should be examined within broader territorial and landscape contexts, where policy orientation and spatial restructuring influence the balance among production, living, and ecological functions. Integrated assessments of landscape connectivity and ecological importance provide additional perspectives for understanding how agricultural development interacts with ecological security and spatial sustainability [18]. First, it extends the literature on agricultural economics and innovation finance by providing firm-level evidence on the effect of RPC on agricultural technological innovation in China. While prior studies have examined patient capital in general industrial settings, agricultural innovation deserves specific investigation because of its long development cycles, high uncertainty, dependence on natural conditions, and strong policy relevance. Second, this study identifies digital transformation and financing constraint alleviation as two mechanisms through which long-term relational capital supports agricultural innovation. Third, by revealing heterogeneous effects across firm size and region, this study provides policy-relevant evidence for designing targeted long-term capital mechanisms that support agricultural science and technology, sustainable agricultural modernization, and rural development strategies. The remainder of this paper is organized as follows. Section 2 reviews the relevant literature and develops the research hypotheses. Section 3 describes the research design, including data sources, sample construction, variable definitions, and empirical models. Section 4 presents the empirical results, including descriptive statistics, baseline regression analyses, mechanism analyses, robustness checks, and heterogeneity analyses. Section 5 discusses the theoretical and practical implications of the findings. Section 6 concludes the study and discusses policy implications.

2. Literature Review and Hypothesis Development

We construct a theoretical conceptual framework to clarify the logical path of RPC affecting agricultural technological innovation, as shown in Figure 1.

Figure 1. Conceptual framework of the relationship between relational patient capital and agricultural technological innovation. Note: The framework illustrates that RPC influences agricultural technological innovation through both temporal commitment and relational engagement. Digital transformation and financing constraints are proposed as potential mechanisms, while firm characteristics and regional heterogeneity may moderate these relationships.

2.1. Patient Capital and Innovation Financing

The relationship between capital structure and corporate innovation has been a central concern in the economics of innovation and corporate finance since the seminal work of Arrow (1962) on the allocation of resources for invention. A recurring empirical finding is that conventional debt financing is poorly suited to innovation: debt contracts impose fixed obligations that are difficult to service when innovation projects fail, while the high proportion of intangible assets in innovative firms limits the collateral value that supports external borrowing [19]. Equity financing alleviates some of these frictions by providing contingent claims on future profits without requiring periodic repayment, but short-term equity investors who impose performance benchmarks and maintain the option to exit can still create incentives for managerial myopia and underinvestment in long-horizon R&D [20,21].

Patient capital, broadly defined as investment with long time horizons and high tolerance for uncertainty, has been proposed as a structural solution to this mismatch [6]. Empirical studies have documented the innovation-enabling effects of specific patient capital institutions. Venture capital with long fund durations supports early-stage R&D by accepting the possibility of extended losses before commercialization [22]. Stable institutional ownership, specifically that of long-term pension funds, sovereign wealth funds, and strategic corporate investors, exhibits a positive relationship with both R&D intensity and patent output; this effect is channeled through the mitigation of myopic pressure and the enhancement of governance quality [23,24]. The mechanisms through which these effects operate include reduced pressure for short-term earnings, enhanced monitoring and governance, and improved access to complementary resources and networks.

In the Chinese context, government-guided investment funds and state-affiliated long-term investors have been studied as mechanisms for channeling patient capital toward strategic innovation sectors [25]. These state-backed patient capital sources play a particularly important role in supporting innovation in sectors characterized by long development cycles and high uncertainty, where private capital may be reluctant to invest. The Chinese government’s emphasis on “expanding patient capital” reflects recognition of the structural mismatch between short-term capital and long-cycle innovation.

2.2. Relational Capital and Information Asymmetry

A distinct but related strand of literature emphasizes the relational dimensions of financing relationships. Relationship banking involves long-term, repeated interactions between lenders and borrowing firms. Prior literature demonstrates that this practice effectively alleviates information asymmetry, lowers borrowing costs, and expands credit access for informationally opaque firms [26,27]. By analogy, relational equity investors who maintain stable shareholding positions, engage in ongoing monitoring and post-investment support, and provide reputational endorsement to portfolio firms can reduce the cost and difficulty of additional external financing, facilitate access to technology networks, and sustain managerial focus on long-term value creation [16,17]. For agricultural technology enterprises, the relational dimension of patient capital is particularly salient. Agricultural innovation involves complex biological systems with highly uncertain outcomes, protracted regulatory pathways, and context-specific performance that is difficult to evaluate from a distance. Long-term shareholders who develop deep knowledge of a firm’s technical trajectory, production environment, and institutional relationships are better positioned to maintain support through setbacks and to provide the governance credibility that facilitates third-party financing. This logic aligns with theories of trust-based investment relationships, in which the quality and stability of investor–firm ties, not merely the duration of investment, determine the effectiveness of capital in supporting innovation [28,29].

2.3. Digital Transformation as a Mediating Channel

Digital transformation, which encompasses the deployment of data analytics, intelligent manufacturing, precision agriculture technologies, and digitally enabled management practices, has emerged as a key driver of agricultural innovation in recent years [30]. Empirically, digitally transformed firms demonstrate higher R&D efficiency through improved experimental data capture and analysis, better coordination across the innovation chain, and lower transaction costs in technology transfer and commercialization [31]. A theoretically coherent pathway thus links patient capital to innovation outcomes via digital transformation: long-term investors provide both the financial resources and the governance stability needed to undertake the significant up-front investments in digital infrastructure that yield innovation efficiency gains over time.

In the agricultural context, digital transformation encompasses precision crop management systems, Internet of Things-enabled field monitoring, genomic data platforms for breeding programs, and digital supply chain integration. Each of these applications reduces the uncertainty and organizational complexity that characterize agricultural innovation, thereby amplifying the effect of sustained R&D investment on patent output and commercial outcomes. The complementarity between patient capital and digital transformation, given that both require long time horizons and high initial investment before yielding returns, suggests that RPC may have a particularly strong effect on innovation among firms that have successfully undergone digital transformation [32].

2.4. Financing Constraints as a Second Mediating Channel

Financing constraints represent a second major pathway through which patient capital may enable agricultural innovation. The “financing gap” in agricultural technology, as evidenced in several developing and transitional economies, arises from a combination of factors: a high proportion of intangible assets, insufficient collateral, extended investment payback periods, and significant informational asymmetry. Collectively, these attributes render conventional external financing both particularly costly and difficult to obtain for ag-tech enterprises [33,34]. The SA index developed by Had