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Fair competition and innovation quality: Evidence from the fair competition review system

Author

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  • Dong, Jie
  • Chen, Gang
  • Li, Houjian

Abstract

Although prior studies have extensively examined the relationship among competition, institutional reforms, and corporate innovation, evidence on how institutions in emerging markets shape innovation quality rather than simply innovation quantity remains limited. Drawing on the implementation of China's Fair Competition Review System (FCRS) in 2016 as a quasi-natural experiment, this paper employs an intensity-based difference-in-differences (DID) approach using micro-level data of Chinese listed firms from 2009 to 2020. The empirical results show that the FCRS significantly improves firms' innovation quality, as measured by patent citations. The effect is stronger among firms with larger asset bases, longer histories, and higher ownership concentration, and is more pronounced in eastern and especially western regions. Mechanism analysis shows that the reform operates by reducing monopoly power, lowering financing costs, as well as improving innovation efficiency.

Suggested Citation

  • Dong, Jie & Chen, Gang & Li, Houjian, 2026. "Fair competition and innovation quality: Evidence from the fair competition review system," Technological Forecasting and Social Change, Elsevier, vol. 231(C).
    • Handle: RePEc:eee:tefoso:v:231:y:2026:i:c:s0040162526002763
    DOI: 10.1016/j.techfore.2026.124799
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    Keywords

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    JEL classification:

    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • L40 - Industrial Organization - - Antitrust Issues and Policies - - - General
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • 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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