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The Effect of Government Policy Consistency on Firm Innovation

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  • Bui Huu Toan

    (Banking Academy of Vietnam)

Abstract

This paper investigates the impact of government policy consistency on firm innovation. We utilize the information about the firm’s self-evaluation of the government policy consistency in the World Bank Enterprise Surveys only available from 2002 to 2006. Controlling for endogeneity problem, our regression results show that the effects of government policy consistency on innovation decisions are heterogeneous in terms of firms’ size and location classified by the income level and region. These findings indicate that in countries with a high prevalence of small and medium-sized enterprises (SMEs) and lower income levels, a flexible policy mix that maintains consistency while promoting adaptability is more effective in fostering firm innovation. This is particularly crucial for supporting technological advancements and responding to dynamic market conditions in these regions.

Suggested Citation

  • Bui Huu Toan, 2025. "The Effect of Government Policy Consistency on Firm Innovation," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(2), pages 8588-8611, June.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:2:d:10.1007_s13132-024-02230-2
    DOI: 10.1007/s13132-024-02230-2
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    Keywords

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    JEL classification:

    • O31 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Innovation and Invention: Processes and Incentives
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L51 - Industrial Organization - - Regulation and Industrial Policy - - - Economics of Regulation
    • J8 - Labor and Demographic Economics - - Labor Standards
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance

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