Does Industrial Policy Play an Important Role in Enterprise Innovation?

ABSTRACT

Using a the sample of A-share listed companies in Shanghai and Shenzhen during the twelfth five-year Plan period (2011–2015), this paper studies the impact of industrial policy and labor allocation on the innovation efficiency of enterprises to test the correlation among government policy, labor allocation and innovation efficiency. The empirical results show that industrial policy significantly improves the innovation efficiency of enterprises; at enterprises with low labor allocation, the innovation efficiency of enterprises is higher with an industrial policy. This study provides a new perspective and empirical evidence that government decision-makers can use in dealing with the relationship between government policies, labor market factors and enterprise innovation.

KEY WORDS:

• enterprise innovation
• industrial policy incentives
• labor cost
• substitution effect

JEL:

• F229

Notes

1. Here we mainly refers to the non-monopoly of knowledge innovation income.

2. Administrative examination, also known as administrative confirmation, is the process in which administrative agencies examine and approve the legitimacy and authenticity of the administrative acts for example, to set up a company, it is necessary to submit the identity card of the owner of the company, the valid financial certificate of the registered funds, and the application materials for the scope of business, and to verify the certification; administrative approval, also known as administrative license, means that the administrative subject agrees that a specific counterpart obtains certain legal qualifications or implements certain acts, in practice this is the issuance of licenses, for example, in China, natural resources such as land and mines are owned by the state. If a private company wants to obtain the right to use or exploit, it must obtain the consent, permission and corresponding business license from the competent government departments.

3. Enterprise autonomy refers to the right of state-owned enterprises to operate independently. Recognition and protection of enterprise autonomy ensures not only the unity of the national economy because China’s state-owned enterprises control the country’s main economic lifeline, such as mines, land and other natural resources, communications, roads, civil aviation, finance, electricity, water, oil, natural gas and other livelihood industries, are all controlled by the government’s state-owned enterprises. The operation of state-owned enterprises is often guided and controlled by government policies to ensure the integrity of the national economy but also the diversity and flexibility of enterprise production and operations. Under China’s traditional economic management system, enterprises lack the necessary autonomy. After the Third Plenum Session of the Eleventh Central Committee of the Chinese Communist Party in 1978, the State Council issued enterprise reforms, which clearly stipulated the responsibilities, rights, and interests of enterprises and expanded their autonomy.

4. “Innovation numbness” refers to disinterest in innovation while “joint innovation” indicates following of leading innovators in carrying out technological change.

5. After innovative knowledge is made public, few people pay for it. This is called the non-exclusivity of revenue.

6. ST is abbreviated as Special Treatment, meaning “Special treatment” .ST company is a listed company with financial or other abnormal conditions.PT is the abbreviation of Particular Transfer. According to the “company law” and “securities law”, if a listed company suffers losses for three consecutive years, its shares will be suspended from listing. Since July 9, 1999, the Shanghai and Shenzhen stock exchanges have implemented a special transfer service for such suspended stocks, which is prefixed with PT and called PT stock. If a listed company loses money for 2 consecutive years, loses money for 1 consecutive year, and its net assets break the buck, or the company has a major illegal act in the process of operation, the stock exchange will carry out special treatment on the company’s stock, namely the ST system. For ST company, if problems occur again, such as continuing losses in the next year to reach the 3 consecutive years loss limit in the company law, PT treatment will be carried out.

7. Whether the industry receives government support depends on its attitude toward development of that particular industry. For instance, the Chinese government has adopted policies to restrict the development of highly-polluting mining and chemical industries, while encouraging high-tech industries, such as integrated circuits and new energy.

Additional information

Funding

This paper is supported by the following project programs. Foundation projects: National Natural Science Foundation projects (71272196, 71572206); Guilin Tourism University High-level Talents Research Initiation Fund projects (KJ0613004), Guilin Tourism University major topics (2018MP01), and “first-class discipline construction” projects (CZ6101002).