{"title":"Factor market distortion and corporate innovation: Theory and evidence from China","authors":"Fu Xin , Ran Sheng , Jie Zhang , Kairui Bai","doi":"10.1016/j.asieco.2024.101778","DOIUrl":null,"url":null,"abstract":"<div><p>The paper models the effect of distortion in factor markets on corporate innovation in a developing country, where the factor markets are underdeveloped in contrast to product markets. The distortion between factor markets and product markets has deteriorated the capability of firms to obtain profits, thereby dampening the incentives of firms to invest in innovation. Using a detailed firm-level dataset with manufacturing corporate innovation activities from 2008 to 2014, we testify to the prediction from the theoretical models that distortion depresses corporate R&D investment as well as R&D per capita. We strengthen our results using an IV approach to address reverse causality. Overall, our results have shed light on an emerging literature on distortion and innovation.</p></div>","PeriodicalId":47583,"journal":{"name":"Journal of Asian Economics","volume":"94 ","pages":"Article 101778"},"PeriodicalIF":2.9000,"publicationDate":"2024-07-15","publicationTypes":"Journal Article","fieldsOfStudy":null,"isOpenAccess":false,"openAccessPdf":"","citationCount":"0","resultStr":null,"platform":"Semanticscholar","paperid":null,"PeriodicalName":"Journal of Asian Economics","FirstCategoryId":"96","ListUrlMain":"https://www.sciencedirect.com/science/article/pii/S1049007824000733","RegionNum":3,"RegionCategory":"经济学","ArticlePicture":[],"TitleCN":null,"AbstractTextCN":null,"PMCID":null,"EPubDate":"","PubModel":"","JCR":"Q1","JCRName":"ECONOMICS","Score":null,"Total":0}
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Abstract
The paper models the effect of distortion in factor markets on corporate innovation in a developing country, where the factor markets are underdeveloped in contrast to product markets. The distortion between factor markets and product markets has deteriorated the capability of firms to obtain profits, thereby dampening the incentives of firms to invest in innovation. Using a detailed firm-level dataset with manufacturing corporate innovation activities from 2008 to 2014, we testify to the prediction from the theoretical models that distortion depresses corporate R&D investment as well as R&D per capita. We strengthen our results using an IV approach to address reverse causality. Overall, our results have shed light on an emerging literature on distortion and innovation.
期刊介绍：
The Journal of Asian Economics provides a forum for publication of increasingly growing research in Asian economic studies and a unique forum for continental Asian economic studies with focus on (i) special studies in adaptive innovation paradigms in Asian economic regimes, (ii) studies relative to unique dimensions of Asian economic development paradigm, as they are investigated by researchers, (iii) comparative studies of development paradigms in other developing continents, Latin America and Africa, (iv) the emerging new pattern of comparative advantages between Asian countries and the United States and North America.
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