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The effects of state ownership on innovation: evidence from the state-owned enterprises reform in China

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  • Jinyong Zhan
  • Jingci Zhu

Abstract

With the quasi-natural experiment of state-owned enterprises reform in China, this paper analyzes the relationship between state ownership and innovation. Utilizing difference-in-differences method, this paper estimates the effects of privatization on innovation in terms of R&D expenditure (innovation input), the number of patents, patents for invention (innovation output) and expenditure per patent (innovation efficiency) with Annual Survey of Industrial Enterprises in China over the period of 1998 and 2007. This paper finds that the privatization of state ownership does not significantly raise the R&D expenditure but does increase the innovation output by 2.5% as well as innovation efficiency by 50%. The results are robust to controlling for other types of ownership change and the industry-time disturbances. We also find that state ownership mainly influences firm innovation performance through the channels of increasing wages and financial constraints.

Suggested Citation

  • Jinyong Zhan & Jingci Zhu, 2021. "The effects of state ownership on innovation: evidence from the state-owned enterprises reform in China," Applied Economics, Taylor & Francis Journals, vol. 53(1), pages 145-163, January.
    • Handle: RePEc:taf:applec:v:53:y:2021:i:1:p:145-163
    DOI: 10.1080/00036846.2020.1796918
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    Cited by:

    1. Zhang, Shengling & Wu, Zihao & He, Yinan & Hao, Yu, 2022. "How does the green credit policy affect the technological innovation of enterprises? Evidence from China," Energy Economics, Elsevier, vol. 113(C).
    2. Wang, Chenxi & Wang, Deli & Deng, Xincai & Wu, Shangrui, 2025. "Does the participation of non-state shareholders matter for state-owned enterprises’ resilience?," International Review of Economics & Finance, Elsevier, vol. 98(C).
    3. Huang, Xiulu & Wang, Xiaoyu & Ge, Pengfei, 2024. "Selective industrial policy and innovation resource misallocation," Economic Analysis and Policy, Elsevier, vol. 82(C), pages 124-146.
    4. Xiyan Mao & Peiyu Wang, 2023. "Import–export nexus and China's emerging trade in environmental goods," Growth and Change, Wiley Blackwell, vol. 54(1), pages 157-181, March.
    5. Xu, Shulin & Chen, Shuoqi & Jiao, Wenniu & Chen, Mengjie, 2025. "State-owned enterprises shareholders and innovation of private enterprises: Evidence from China," Technovation, Elsevier, vol. 140(C).
    6. Yinxin Su & Mingzhi Hu, 2025. "Over-financialization and green innovation: the moderating role of digitalization," Humanities and Social Sciences Communications, Palgrave Macmillan, vol. 12(1), pages 1-12, December.
    7. Dongmin Kong & Zihan Xiong & Ni Qin, 2024. "How Does Climate Risk Affect Employment Adjustment? Firm-Level Evidence From China," Bulletin of Monetary Economics and Banking, Bank Indonesia, vol. 27(4), pages 655-680, December.
    8. Hui Wang & Anyin Jiang & Fayyaz Ahmad & Nabila Abid & Abbas Ali Chandio, 2024. "Attribute imbalances and innovation implementation based on grounded theory: A case of Chinese enterprises in Gansu Province," Business Strategy and the Environment, Wiley Blackwell, vol. 33(2), pages 407-423, February.
    9. Luo, Yonggen & Wang, Deli & Hu, Shiyang, 2024. "Patent collateral and the trajectory of innovation," Pacific-Basin Finance Journal, Elsevier, vol. 84(C).
    10. Xiang Chen & Ting An & Yanan Liu & Jiaqi Hao, 2025. "Exploring the role of science and technology finance in carbon emissions reduction: evidence from China," Climatic Change, Springer, vol. 178(8), pages 1-25, August.
    11. Liangchun Yu & Xinxin Wang, 2025. "Foreign institutional ownership and corporate innovation in emerging economies: Heterogeneity analysis of private enterprises and state-owned relative holding enterprises in China," Journal of Evolutionary Economics, Springer, vol. 35(3), pages 441-470, July.
    12. Fei Wang & Hao Wang & Qiliang Mao, 2025. "State-owned enterprises fail to drive regional technological diversification: evidence from China," Empirical Economics, Springer, vol. 69(2), pages 915-949, August.
    13. Huijuan Li & Yinfei Zhao & Yang Li & Yong Wang, 2024. "Turning inward in difficulties: R&D human resource slack, technological diversification, and independent innovation," PLOS ONE, Public Library of Science, vol. 19(6), pages 1-25, June.
    14. Cao, Tiantian & Li, Weian & Zhang, Yaowei & Zheng, Minna, 2024. "Win–win or Lose–Lose? Dual logic, board factional faultlines, and ambidextrous innovation in state-owned enterprises," Technovation, Elsevier, vol. 137(C).

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