“Minor offenses with heavy penalties “or” equivalent penalties ":Whether the business environment construction can support the breakthrough and innovation of enterprises

A well-functioning business environment can promote innovation activities. In recent years, many studies have examined the relationship between the business environment and innovation, but the focus has largely been on the market economy, neglecting the impact of the rule of law business environment. Unstable regulatory enforcement by public personnel can affect enterprises' external environment assessments and decision-making. Therefore, using data from Chinese listed companies and provinces from 2008 to 2022, this study employs a two-way fixed effects model for empirical analysis to explore the impact of the rule of law business environment on enterprises' radical innovation, drawing the following conclusions. When administrative personnel strictly enforce laws, minor offenses with heavy penalties can degrade the local business environment and have a negative impact on enterprises’ radical innovation, and rent-seeking has a mediating role. The suggestions we propose are that law enforcement personnel should standardize regulatory enforcement, adhere to a combination of punishment and education, and strengthen the awareness of equivalent penalties. Furthermore, laws and regulations related to rent-seeking should be developed and refined to reduce legal gaps and enterprises should be educated more effectively. Enterprises should also set long term goals, enhance their risk-bearing capacity, maintain a sense of social responsibility, and promote innovative development.