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Firm-level perception of competition and innovation: Textual evidence from China

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  • Xia, Xiaoxue
  • Xiao, Yao

Abstract

We explore the relationship between firm-level perception of competition and innovation using a sample of Chinese listed firms during the period of 2007–2020. We find that higher perceived competition increases corporate innovation inputs. The results remain robust after we control for endogeneity issues and conduct a battery of robustness checks. Further tests show that the relationship is more prominent for less competitive industries, state-owned enterprises, less financially constrained firms, and stronger property protection regions. We also find that competition perception is associated with higher innovation outputs. Overall, our results imply that firms’ concern for competition stimulate firms’ innovation.

Suggested Citation

  • Xia, Xiaoxue & Xiao, Yao, 2023. "Firm-level perception of competition and innovation: Textual evidence from China," Finance Research Letters, Elsevier, vol. 53(C).
    • Handle: RePEc:eee:finlet:v:53:y:2023:i:c:s1544612322007693
    DOI: 10.1016/j.frl.2022.103593
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    More about this item

    Keywords

    Perception of competition; Innovation; Textual analysis;
    All these keywords.

    JEL classification:

    • D41 - Microeconomics - - Market Structure, Pricing, and Design - - - Perfect Competition
    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives

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