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Breaking barriers for diversification: Evidence from China’s Fair Competition Review System

Author

Listed:
  • Yituan Liu

    (Jinan University, Department of Economics
    Jinan University, School of Economics)

  • Yang Yu

    (Jinan University, Department of Economics
    Jinan University, School of Economics)

Abstract

Administrative monopolies, as a non-market barrier, significantly obstruct the flow of resources across regions and often prevent external enterprises from entering local markets. This increases the risks for enterprises implementing product diversification strategies. This paper examines the quasi-experiment of China’s Fair Competition Review System (FCRS), implemented in 2016 to regulate administrative monopoly, and estimates its causal effect on enterprise diversification. The findings reveal that the FCRS significantly increases both related and conglomerate (i.e., unrelated) diversification of enterprises. Specifically, the FCRS reduces external risks from unfair competition, enabling enterprises to expand product diversification by limiting local governments’ fiscal power and promoting external investments. This study provides new evidence and insights on the impact of competition policy on enterprise strategic behaviors.

Suggested Citation

  • Yituan Liu & Yang Yu, 2025. "Breaking barriers for diversification: Evidence from China’s Fair Competition Review System," Journal of Regulatory Economics, Springer, vol. 68(3), pages 303-340, December.
    • Handle: RePEc:kap:regeco:v:68:y:2025:i:3:d:10.1007_s11149-025-09495-8
    DOI: 10.1007/s11149-025-09495-8
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    Keywords

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    JEL classification:

    • L41 - Industrial Organization - - Antitrust Issues and Policies - - - Monopolization; Horizontal Anticompetitive Practices
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis
    • K21 - Law and Economics - - Regulation and Business Law - - - Antitrust Law
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy

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