State assets supervision reform: Does it boost SOEs' digital innovation quantity and quality?

This study investigates the impact of the shift in state assets supervision, from a focus on managing assets to managing capital, on digital innovation by state-owned enterprises (SOEs). Utilizing the “two types of companies” reform as a quasi-natural experiment and a difference-in-differences model, we find that the reform significantly enhances both the quantity and quality of SOEs’ digital innovation. Mechanism analyses indicate that this effect operates through increased executive compensation incentives, reduced agency costs, the mitigation of managerial myopia, and eased financing constraints. Heterogeneity tests reveal that the reform's impact is nuanced and context-dependent; it primarily enhances the quality of digital innovation in high-tech industries and boosts its quantity in non-high-tech industries. These effects manifests as improved innovation quality in regions with high local government debt, and a significant increase in innovation quantity in regions with low debt. Moreover, the reform’s positive impact is more pronounced in regions with lower science and technology expenditure and in firms where the top management team collectively has a stronger R&D background. These findings clarify the heterogeneous impacts of the reform and provide empirical evidence for designing tiered and context-specific supervision policies in transition economies.