Can Private Enterprises Improve Their Technological Innovation by Joining the Military Business? Evidence from China

Abstract

Military-civilian integration is an effective way to promote the development of defence engineering, but existing studies have not given a clear answer whether the participation of private enterprises in military business is conducive to promoting technological innovation of enterprises. In this study, A-shared listed companies in China from 2001 to 2018 were sampled, and the influence of their participation in military business on technological innovation was investigated using a multi-period difference-in-difference (DID) method. Results show that: (1) by joining the military business, private enterprises can significantly strengthen their R&D inputs and substantive innovation, thus promoting their technological innovation. (2) The participation of enterprises in military business acts upon substantive innovation outputs and further affects their technological innovation through R&D input intensity. (3) Participation in military business exerts a stronger positive promoting effect on enterprises in regions with a high marketization level than in regions with a low marketization degree. By joining the military business, SMEs are driven to enlarge their R&D inputs, while large enterprises can enhance their innovation outputs. The policy implications of the obtained conclusions indicate that it requires to be strengthened for private enterprises participating in military business to help reduce their technological innovation risks and improve the construction level of defence engineering projects.