*4.2. Endogenous Test*

The above analysis shows that executives could improve the current period performance through reducing RD innovation expenditure. However, the increase in RD investment will inevitably enhance the market competitiveness of energy enterprises, thus improving the financially sustainable performance. Therefore, there may be an endogenous relationship between RD investment and financially sustainable performance, which leads to the endogenous deviation in the results of the ordinary least square method. Therefore, this paper first tests the endogeneity of these two variables. We employed the Hausmann endogeneity test, and the results are shown in Table 5. ε1 and ε2 are the residuals obtained by linear regression of all exogenous variables with RD investment in Equations (3) and (4), respectively. Then this paper introduces them into Equations (5) and (6), respectively. The regression coefficients are −2.808 and −2.359, respectively. The coefficients significance shows that there is an endogenous relationship between RD investment, short-term profitability and long-term development capacity. Therefore, we need to use simultaneous equation model to estimate the relationship between RD investment and financially sustainable performance.

**Table 5.** The results of the Hausman test.


#### *4.3. Regression Analysis of Full Samples*

The full sample regression results in Table 6 show that, from the perspective of the relationship between RD investment and financially sustainable performance, the results of 3SLS estimation are partially opposite to those of ordinary least square (OLS) estimation, because OLS estimation does not solve the endogenous problem. The 3SLS estimation could effectively solves the endogenous problem of RD investment and financially sustainable performance. In the aspect of RD investment affecting financially sustainable performance, the results show that the current period's RD investment has a significant negative impact on short-term profitability and long-term development capacity, which means that the increase in RD expenditure in the current period will reduce profits. Meanwhile, RD investment in lag period I and II has a positive impact on the current period's financially sustainable performance, but the coefficient is not significant. The reason could be that different types of RD project produce actual economic benefits at different times.



Note: \*\*\*, \*\*, \* Significant at 1%, 5%, and 10% levels, respectively; () of 3SLS estimation and () of OLS estimation represent z value and t value, respectively.

In the aspect of financially sustainable performance reverse affecting RD investment, the short-term profitability and long-term development capacity of the current period are positively correlated with RD investment, while the lag period I and II of short-term profitability and long-term development capacity are negatively correlated with RD investment. This shows that RD investment decision-making has a time lag. In the case of better financially sustainable performance in the current period, the company lacks motivation for future RD innovation. On the contrary, poor financially sustainable performance in the current period will promote RD investment. At this stage, we believe that financially sustainable performance lags behind RD investment, so it is less likely that financially sustainable performance will reverse affect RD investment. Therefore, this is only a measurement result and has no practical significance.

#### *4.4. Regression Analysis of Di*ff*erent Type Energy Companies*

The results of 3SLS estimation for different types of energy companies are shown in Table 7. For technology-intensive energy companies, the short-term profitability and long-term development capacity of lag period I and II are significantly negative correlated with RD investment. The RD investment in lag period I and II has a positive impact on the short-term profitability and long-term development capacity. The coefficient of lag period I is significant at the level of 1%, and has a significant negative correlation with the short-term profitability and long-term development capacity of the current period. This means that the economic benefits of RD investment have an obvious lag effect, which is consistent with the characteristics of technology-intensive energy companies. In addition, the current RD investment has a negative impact on the financially sustainable performance.


**Table 7.** The results of 3SLS regression based on industry.

Note: \*\*\*, \*\*, \* Significant at 1%, 5%, and 10% levels, respectively; () of 3SLS estimation represents z value.

For the capital-intensive energy companies, the result is quite different from that of technology-intensive energy companies. The short-term profitability and long-term development capacity of lag period I are significantly positively correlated with the current period's RD investment. RD investment in the current period has a significant positive impact on short-term profitability and long-term development capacity. The input is proportional to the output, which is also in line with the characteristics of capital-intensive energy company. However, the RD investment in the lag periods I and II significant restrains the short-term profitability and long-term development capacity of the current period, which may be due to the increase in the depreciation and amortization ratio brought by the RD investment in the previous period, thus reducing the enterprise's revenue.

For labor-intensive energy companies, the short-term profitability and long-term development capacity of lag period I have a significant positive correlation with RD investment at the level of 10%, which is similar to capital-intensive energy companies. Only with better financially sustainable performance in the previous stage can energy companies invest their profits in future RD. There is no significant correlation between RD investment and short-term profitability and long-term development capacity, which could be related to low RD investment and innovation efficiency of labor-intensive energy companies.

#### *4.5. The Moderating E*ff*ect of Executive Incentives*

RD investment and executive incentives in the lag period are used as independent variables and introduced into Equations (7) and (8). The results are shown in Table 8. In the context of the full sample, the RD investment in the lag period has a positive effect on short-term profitability, and the impact in the lag period I is significant, which is consistent with the previous results. After the introduction of the interaction between the lag period executive incentives and RD investment, it is found that salary incentives could significantly improve the short-term profitability and long-term development capacity, and the interaction term coefficient with RD investment is also significantly positive, which means that salary incentives can promote the increase in the previous period's RD investment. It has a positive moderate effect on the relationship between RD investment and financially sustainable performance.


**Table 8.** The moderating effect of executive incentive based on industry.

Note: \*\*\*, \*\*, \* Significant at 1%, 5%, and 10% levels, respectively; () of OLS estimation represents t value.

In the context of the enterprise level sample, the technology-intensive energy companies further verify the role of salary incentives. However, for the capital-intensive energy companies and labor-intensive energy companies, although the lag period RD investment may inhibit the current period's financially sustainable performance due to depreciation and amortization, the salary incentive still plays a catalytic role, which can significantly moderate the positive impact of RD investment on short-term profitability and long-term development capacity. However, for equity incentive, no matter the full sample or the enterprise level sample, RD investment has no significant impact on short-term profitability and long-term development capacity.

#### **5. Conclusions and Policy Implications**

The results demonstrate that the previous period's sustainable financial performance has a significant negative impact on the current period RD investment. Meanwhile, the current period's RD investment has a significant negative impact on the current period's financially sustainable performance, while the previous period's RD investment has a positive impact on the current period's financially sustainable performance with no significant level. In the context of different types of energy company, for technology-intensive energy companies, the previous period's financially sustainable performance has a significant negative impact on the current period RD investment. For capital-intensive energy companies, the result is the opposite compared to technology-intensive energy companies. The financially sustainable performance in the previous period is positively correlated with the RD investment in the current period, and the RD investment in the current period is significantly positively correlated with the financially sustainable performance in the current period. However, the previous RD investment has a significant negative impact on the current period financially sustainable performance. For labor-intensive energy companies, the impact of financially sustainable performance on RD investment is similar to that of capital-intensive energy companies, while the positive effect of RD investment on financially sustainable performance is not significant.

In the moderate effect of executive incentives, salary incentives could significantly improve financially sustainable performance, and has a moderate positive effect on RD investment and on financially sustainable performance. In the context of different types of companies, for technology-intensive energy companies, salary incentives can improve the executive motivation of RD investment and enhance the future profitability of the company. For capital-intensive energy companies and labor-intensive energy companies, although the previous period's RD investment may have a negative impact on the current period's financially sustainable performance, the increase in executive incentives is conducive to the smooth operation of energy companies and the improvement of financially sustainable performance. Therefore, this paper believes that salary incentives have a significant positive moderate e ffect on the relationship between RD investment and financially sustainable performance. In contrast, equity incentives are not significant in the regression results of the full sample, which means that equity incentives have no significant moderate e ffect on the relationship between RD investment and financially sustainable performance.

The implications of this paper are as follows: first, energy enterprises should improve their incentive mechanisms for executives—on the one hand, improving the level of salary incentives could stimulate managers' motivation to serve the company, and on the other hand, improving the level of equity incentives can reduce the conflict of interests between managers and shareholders and improve energy enterprise's financially sustainable performance by reducing the managers' short-sighted behavior and the cost of principal-agent problems. Second, energy companies should enhance their awareness of technological innovation and increase RD investment. In the increasingly fierce market competition, although technological innovation activities are uncertain and high-risk, most scholars believe that RD investment can bring sustainable growth to enterprises. Innovation-oriented energy enterprises have greater potential for sustainable growth and increase investment in RD activities. Therefore, technology-intensive energy enterprises rely on more innovation activities than non-technology-intensive energy enterprises, and they should pay more attention to RD investment than that of general energy enterprises. Finally, energy companies should attach importance to the combination of executive incentives and RD investment. The results indicate that the impact of RD investment on financially sustainable performance will be moderated by executive incentives. According to the theory of competitive advantage, the resources owned by an enterprise are the source of its own advantages. The e ffective utilization of resources can be transformed into unparalleled competitive advantage.

This paper uses short-term profitability and long-term development capacity to measure financially sustainable performance. However, future research could use di fferent methods, such as the sustainable growth model proposed by Colley et al. [55], to measure financially sustainable performance to expand the robustness and consistency of the research model.

**Author Contributions:** The research is designed and performed by K.S. and X.L.X. The data were collected by X.L.X. and H.H.C. Analysis of data was performed by K.S. Finally, the paper is written by X.L.X. and H.H.C. All authors have read and agreed to the published version of the manuscript.

**Funding:** This research was funded by [Youth Project of Humanities and Social Sciences of Ministry of Education in China] gran<sup>t</sup> number [18YJC630213]; [Natural Science Foundation of Hunan Province] gran<sup>t</sup> number [2019JJ50382] and [Key Project of Hunan Education Department] gran<sup>t</sup> number [19A292].

**Acknowledgments:** We sincerely thank the editor and reviewers for their very valuable and professional comments.

**Conflicts of Interest:** The authors declare no conflict of interest. The founding sponsors had no role in the design of the study; in the collection, analyses, or interpretation of data; in the writing of the manuscript, and in the decision to publish the results.
