Abstract: Cash flow and growth opportunities have been widely considered as the two core elements in investment decision. However, when we think further, among the two, which is the most important driving force in investment? The question has got little attention. Furthermore, in view of the different effects on enterprise development derived separately from intangible assets and tangible assets, this paper explores the primary driving force behind the two kinds of investment respectively. Meanwhile, since the external environment is vital in decision-making, this research further studies the effect of macroeconomic condition and investor sentiment on the investment sensitivity to cash flow and growth opportunities. In order to obtain more accurate and more significant results, we selected public companies from National Innovative Enterprises, which are listed on the website of the Ministry of Science and Technology of the People’s Republic of China from 2006 to 2013 as samples. We refer to the investment-decision model from McLean and Zhao (2014). (Here insert the formular (4) in page 3 of our paper) Here, I/A is defined as the investment rate of intangible asset and the investment rate of tangible asset separately, and the growth opportunity q and the cash flow CF/A are the main explanatory variables. The macroeconomic condition E and the investor sentiment S are taken into account as well. Referring to Baker and Wurgler (2006), and considering the reality of China's financial market, we constructed an investor sentiment index with six variables: the closed-end fund discount, the trading volume, the number of IPOs, the average first day’s return of IPOs, the new investor accounts and consumer confidence index. Macroeconomic conditions are likely to affect investor sentiment, so all the sentiment variables are regressed on four macroeconomic variables and the residuals from these regressions are used as the investor sentiment proxies in our tests. We use the macroeconomic condition and investor sentiment proxies in the same regressions, so the effect of one variable is measured while the other is controlled. Meanwhile, different from the current studies, the contents of the intangible asset investment here include the increment in accounts of "intangible asset" and "development expenditure" and the R&D expenses, which cover the true input of enterprises’ R&D activities. This paper gets a significant conclusion that the growth opportunities sensitivity to intangible asset investment is almost equal, even stronger, compared with the cash flow. However, tangible asset investment is more sensitive to cash flow, rather than growth opportunities. The first driving factor of total asset investment is cash flow as well, which is consistent with the current situation that most business investments are tangible asset investments in China. Furthermore, when considering external environment, we find that investor sentiment strengthens the effect of growth opportunities on intangible asset investments, while expansive macroeconomic condition makes tangible asset investments more sensitive to cash flow. In summary, we put forward a novel and unique perspective to consider the issue of driving factors in investment decision-making. We adopt McLean and Zhao’s model (2014) to Chinese enterprises investment problems. Our highlights lie in distinguishing intangible asset investment and tangible asset investment, and taking the macroeconomic condition and at the same time the investor sentiment into account. This paper contributes much in academic value to both enterprise investment theory and investment-driving research. What is more important, in this innovation-driven era, intangible asset is increasingly becoming the key element of corporate success, making determining its primary driving factor essential. This paper also has important practical significance for enterprise innovation and R&D investment decision-making.

Key words: enterprises&rsquo, innovation, R&D activities, intangible assets investment, tangible assets investment, growth opportunities, cash flow