Does China's Anti-Corruption Campaign Promote Corporate Innovation?

Vigorous anti-corruption campaigns launched by China since the 18 th CPC National Congress have produced an extensive impact on China's political and economic landscapes. From the micro-perspective of corporate innovation, this paper investigates the effects of anti-corruption efforts on corporate behavior. This paper has found that seeking political connections and promoting innovation are mutually substitutable means of development for firms. Anti-corruption efforts have increased the costs for firms to seek political connections and thus raised the incentives for corporate innovation. After the launch of anti-corruption policies, the level of corporate innovation significantly increased. In particular, R&D spending increased significantly for firms previously with political connections. Anti-corruption efforts have promoted overall corporate innovation. This paper has also found that the effects of anti-corruption efforts on corporate innovation are heterogeneous at the provincial level. For firms previously with political connections in provinces with a high anti-corruption intensity, the level of innovation increased more significantly. Given the controversies concerning the effects of the recent round of anticorruption campaign on economic growth, this paper provides new evidence that anticorruption efforts are favorable to corporate innovation. Considering the endogenous problem, this paper has adopted the policy experiment of anti-corruption efforts after the 18 th CPC National Congress and the difference-in-differences(DID) technique.

Corporate innovation behavior and internal governance mechanism

Innovation is a process results in new products, methods of production and forms of business organization. Innovation can vastly improve the welfare of consumers, investors, firms and the economy. However, there is relatively limited evidence of how corporate governance affects corporate innovation. In this study, the author theoretically demonstrates how internal governance mechanisms interact to affect innovation, such as internal control, monitoring and compensation contracts. Governance mechanisms are determined by firm characteristics. The ＂best＂ governance structures that can be adopted universally do not exist. However, innovative firms often share similar characteristics, and they adopt similar governance mechanisms to facilitate innovation. The ultimate purpose of such internal governance mechanism that facilitates innovation is to prevent managers＇ myopia, and this paper concludes 5 different roles in internal governance mechanism that facilitate corporate innovation behavior.

Analyst Coverage,Forecasting Bias,and Corporate Innovation:Evidence from China

Due to information asymmetry and strategic innovation,firms often encounter challenges related to insufficient driving forces and low-quality innovation outcomes.Analysts always act as information intermediaries who help foster the advancement of corporate innovation activities and the conversion of innovation output.This study examines the impact of analyst coverage and forecasting bias on corporate innovation,employing data from China A-shared listed firms spanning the period 2007 to 2019.We measure corporate innovation from two perspectives:Input and output.Specifically,we use the ratio of research and development(R&D)expenditure to sales as a proxy for the innovation input and the number of patent citations excluding self-citations to measure innovation output.We find that analyst coverage promotes corporate innovation,which is consistent with the“bright”side of analyst coverage.However,the positive effect of analyst coverage hinges on effectively transmitting and disclosing accurate information to investors in the capital market.Based on this,analysts'forecasting bias includes forecasting dispersion and optimism bias.We find evidence that an increase in analysts'forecast dispersion leads to a decrease in corporate innovation quality.Moreover,this paper presents a novel approach by employing the regression discontinuity method to examine the effect of analyst optimistic bias on firm innovation.The empirical findings reveal that overly optimistic forecasts by analysts exacerbate innovation quality.These analyses enrich the research on analyst coverage and corporate innovation,providing an empirical basis for improving the capital market with the help of analysts.

The Impact of Membership in Non-Local Chambers of Commerce on Corporate Innovation:The Dual Role of Business Culture and Social Networks

Using a sample of A-share listed companies from the Shanghai and Shenzhen Stock Exchanges from 2010 to 2020,this study examines the impact of membership in non-local chambers of commerce(NLCCs)on corporate innovation,considering the dual attributes of business culture and social networks associated with these chambers.The research finds that joining a NLCC significantly promotes corporate innovation.Agency costs play a partial mediating role between membership in NLCCs and corporate innovation,with a chain mediation path of“NLCC-social capital-agency costs-corporate innovation.”Further analysis reveals that the more NLCCs there are in a company’s location,the greater the positive impact of joining one on corporate innovation.The promotion effect of joining a NLCC on corporate innovation is stronger for state-owned enterprises(SOEs)compared to non-state-owned enterprises(non-SOEs).In addition,membership in NLCCs fosters both invention and non-invention innovation.

Fault Tolerance for Corporate Innovation:Evidence from the Reform of State-owned Enterprises

Innovation is the source of power for high-quality development,and a relaxed institutional arrangement is a necessity for promoting innovation in enterprises.This paper examines the impact of fault tolerance on corporate innovation,theoretically analyzes the positive effects of fault tolerance on stimulating innovation,and estimates the influence of fault tolerance on corporate innovation by using the panel data of listed manufacturing companies from 2007 to 2019,taking the quasi-natural experiment of fault-tolerance system in various places since the new round of stateowned enterprise(SOE)reform.This study finds that the fault-tolerance system has significantly improved the R&D investment and patent application of the pilot SOEs,but the incentive effect is mainly reflected in the utility model patents;fault-tolerance system mainly promotes corporate innovation by alleviating managers’career worries and improving governance ability.Furthermore,the fault-tolerance system is more effective for small and medium-sized SOEs with low market competition and can alleviate the restriction of agency cost on corporate innovation.In addition,the fault-tolerance system has not yet had a significant spillover effect on private enterprises.These results show that in the SOE reform,it is necessary to strengthen the institutional arrangement of fault tolerance and create a relaxed environment to encourage innovation;it is necessary to organically integrate fault-tolerancesystem design into executive measurement and corporate governance,promote faulttolerant system to be implemented in a wider range of enterprises,and enhance the incentive effect on high-quality innovation.

Talent Policy,R&D Personnel Recruitment and Corporate Innovation

This paper analyzes the impact of talent policy on the R&D personnel recruitment and corporate innovation.The research is based on more than 5.8 million online recruitments from listed companies from 2017 to 2018.The study makes five principal findings.Firstly,companies affected by talent policy have significantly increased the number of R&D personnel recruited.Secondly,at the policy level,the incentive effect varies according to different levels of talent policy subsidies and threshold requirements,with more significant effects observed where subsidies are higher and threshold requirements are lower.Thirdly,at the enterprise level,the incentive effect is more significant for high-tech enterprises,better-governance companies,and non-state-owned enterprises.Fourthly,at the city level,the incentive effect is more significant in cities with better economic development,higher administrative levels,and better scientific research support environments.Finally,after the introduction of talent policy,there have been significant improvements in enterprises'R&D investment,patent output and R&D efficiency.In terms of R&D personnel recruitment,this paper provides micro-level evidence for the influence effect,and identifies specific mechanisms and boundary conditions of talent policy on corporate innovation.It expands the research on the influence effect of government and institutional factors on corporate innovation.In addition,it provides reference for accelerating the building up of a talent-strong country,deepening the implementation of innovation-driven development strategy and realizing economic transformation and upgrading.

Non-actual controllers and corporate innovation:Evidence from China

As the number of“ownerless”enterprises in China’s capital market increases,so does the importance of paying attention to their behavior.From the perspective of enterprises’control rights allocation,we find that non-actual controllers can inhibit corporate innovation by intensifying agency conflicts,reducing corporate risk-taking and strengthening financing constraints.We also find that a larger proportion of independent directors,higher audit quality,greater managerial ownership and less environmental uncertainty weaken the negative effect of non-actual controllers on corporate innovation.In contrast,multiple large shareholders strengthen the inhibitory effect of nonactual controllers on corporate innovation,but this inhibitory effect comes from over-supervision rather than from collusion.We further divide nonactual controllers into real and hidden types and find that real non-actual controllers still have a significant inhibitory effect on corporate innovation.Finally,we rule out the competitive explanation of equity dispersion,whereby non-actual controllers inhibit corporate innovation.This study enriches the literature on the factors influencing corporate innovation and provides evidence of the adverse impact of non-actual controllers.

Corporate innovation and environmental investment:The moderating role of institutional environment

Corporate environmental investment helps improve corporate environmental performance,which,therefore,is an effective micro-level solution to mitigate environmental concerns generated by corporate excessive resource exploitation and energy use.Using Chinese listed firms within environment-related industries over the period 2011–2018 as the research setting,this study applies the panel data model to investigate the impact of corporate innovation on environmental investment,as well as the moderating effects of institutional factors.The results show that corporate innovation significantly improves firms'environmental investment with 1%Research&Development(R&D)investment ratio increase generating 2326 CNY(around 351 USD at 2018 exchange rate)increase in environmental investment;the moderating effect of environment policy is positive and significant while the moderating effect of internationalisation level is not significant,indicating that current environment policy implementation helps to strengthen the positive impact of corporate innovation on environmental investment while the role of internationalisation level in this nexus is not observed.From a micro-level perspective,the findings of this study shed light on mitigating environmental concerns through enhancing corporate innovation,and provide evidence that China's corporate internationalisation process awaits more regulatory controls.

Independent technical directors and their effect on corporate innovation in China

As outside advisors,independent directors serve as both consultants and monitors.Based on empirical studies of corporate innovation and independent directors,we used data from listed firms in China from 2007 to 2017 to examine the effect of hiring independent technical directors on the board of directors.This study focused on a firm’s innovation performance and the extent to which this performance is influenced by the relevance of a director’s expertise to the activities of the firm.The results show that when the technical expertise of an independent director is relevant to the operational field of the firm,the firm should perform better in terms of innovation.This result is still significant when applying the two-stage instrumental variable method,showing a higher significance when using the exogenous event of the 2014 Wenfeng.plc case.Moreover,independent technical directors influence innovation primarily by encouraging firms to deepen their current field of research rather than expanding to other fields.Our findings can guide corporations to hire more relevant independent technical directors and can help the government design more accurate policies that promote innovation and entrepreneurship.

Official rotation and corporate innovation: Evidence from the governor rotation

Rotation is a practice whereby officials are regularly moved between equally ranked positions.Focusing on governor rotation,this paper examines the effect of official rotation on corporate innovation in China.First,we find that official rotation significantly promotes corporate innovation,including enterprises’innovation investment,quantity,and quality.Second,we find that the effect of official rotation on corporate innovation varies because of official and regional heterogeneity.Officials rotating from other provinces significantly stimulate corporate innovation,but officials rotating from the central government have an insignificant influence on corporate innovation.In addition,offi-cials rotating to non-eastern regions significantly enhance corporate innovation,while officials rotating to eastern regions have a negligible impact on corporate innovation.We further examine the driving mechanism behind the effect of official rotation on corporate innovation and find that officials rotating from eastern regions to non-eastern regions can significantly promote corporate innovation,but officials rotating from non-eastern regions to eastern regions do not boost corporate innovation.These findings imply that the different effects of official rotation on corporate innovation are due to the official experience effect.We also find that official rotation can promote corporate innovation through reducing corporate charitable donations and increasing corporate innovation subsidies.In a supplementary analysis,we find that GDP-oriented performance appraisal pressure weakens the effect of official rotation on corporate innovation.The lower the pressure on officials regarding their performance,the more significant the effect of official rotation on corporate innovation.In addition,official rotation can significantly promote the development of the regional economy and improve the GDP growth rate via corporate innovation,which is a micro-level economic growth effect of official rotation.Overall,our findings further verify the economic effect of official rotation and extend our understanding of the influencing factors of corporate inno-vation from the perspective of the official governance system.Our findings also have clear policy implications for how the government can improve the official governance model to promote corporate innovation during the transition period of the national innovation system.

Home purchase restriction, real estate investment, and corporate innovation

It is ubiquitous for non-real estate firms to condua real estate business in China.Home purchase restriction(HPR)affeas corporate innovation by dampening the real estate investment of non-real estate firms.The extant literature has examined the impaa of HPR on corporate innovation,but it has not focused on the expeaation of HPR and the endogeneity problem.Employing a dataset of 1,830 listed non-real estate firms over the period 2009-2016,this research explores the expectation of HPR on corporate innovation based on the motivations for real estate investment in non-real estate firms.We demonstrate that HPR facilitates the enhancement of research and development(R&D)investment in non-real estate listed firms by hindering real estate investment,particularly for non-high-tech firms.The effects of HPR arrive at the crest in the third implementation year and remain steady thereafter.The real estate investment of non-real estate firms rebounds and the R&D investment declines along with the cancellation of HPR.Tackling the selection bias and endogeneity problems,the baseline results are also robust.Hence,HPR should serve as a long-term vehicle to improving corporate innovation,in addition to preventing housing speculation.

Will Performance Evaluation Boost SOE Innovation?

There are two opposing views over the necessity of privatization for SOEs. While some believe that privatization is the only solution to SOE inefficiency, others contend that privatization will lead to serious loss of state assets without resolving the problem. This paper examined how performance evaluation system contributed to the innovation and profitability of central SOEs after the implementation of the revised Interim Measures for Assessment of the Operational Performance of Persons in Charge of Central Enterprises in 2009. Using this revision as a natural experiment, this paper conducted a difference-indifference analysis and discovered a significant improvement in the innovation of central SOEs after the implementation of the new policy as compared with private firms not affected by this system. Moreover, the revised performance evaluation system significantly improved the marginal contribution of innovation to corporate value. The above test result indicates that SOEs may become more efficient solely by altering executive incentives without privatization. In this sense, privatization may not be the only solution to SOE inefficiency. This paper offers theoretical insights on the controversies regarding SOE privatization and helps enrich relevant literature on corporate incentives and innovation.

Thinking of Establishing Corporate Governance Model with Chinese Characteristics

After repeated comparison, we believe that the theory of building Chinese management system should be to stimulate innovation as a core, thus forming a complete Chinese enterprise culture, as well as business development and strategic choice as a means of enterprise organizational change management theories

Bureaucratic Culture and Innovation

This study explores the effects of bureaucratic culture on innovation.We define bureaucratic culture as a culture in which power and officials are held in the highest regard.Using panel data of publicly listed Chinese manufacturing firms from 2007 to 2015,we found that bureaucratic culture negatively correlated with firms'patent output.A mechanism analysis shows that bureaucratic culture hindered corporate innovation by reducing firms'research and development inputs and decreasing innovation efficiency.Furthermore,we provided evidence that anti-corruption campaigns and the development of formal institutions could neutralize the negative impact of bureaucratic culture on corporate innovation.This study is the first to investigate quantitatively the causal effect of bureaucratic culture on corporate innovation and it can deepen the understanding of the relationship between culture and innovation in China.We speculate that promoting a creative culture,particularly one that fosters entrepreneurial spirit,is of utmost importance.

How Does Government Procurement Promote Enterprise Innovation?-On the Synergy between Demand-Pull and Supply-Push of Innovation Policies

The promotion of technological innovation in firms requires both the supply-push and the demand-pull.To accurately identify,assess,and further enhance the incentive effects of the policies of government procurement for innovation in China,this paper uses the text analysis method to identify government procurement for innovation from more than 640,000 pieces of government procurement contracts and conducts an empirical analysis based on the data of China's A-share listed firms from 2015 to 2020.The study finds that government procurement for innovation significantly promotes corporate innovation by increasing the expected market returns,reducing R&D uncertainty,and easing financing constraints.Specifically,local government procurement for innovation,central government procurement for innovation,and procurement for innovation by universities and research institutes bring more significant innovation incentives for firms;and government procurement for innovation generates stronger innovation incentives for firms in strategic and emerging industries,private firms,and small-and medium-sized enterprises.Further analysis reveals that demandside innovation procurement and supply-side innovation subsidies generally have mutually reinforcing synergies on corporate innovation.The policy synergies vary depending on the levels of corporate innovation and the orders of policy implementation.In terms of the levels of corporate innovation,the two-sided policies has mutually complementary effects on innovation-leading firms and mutually exclusive effects on innovation-lagging firms.From the perspective of the orders of policy implementation,the strategy of supply-side subsidies first,and demand-side procurement second is more effective in promoting corporate innovation than the strategies of demand-side procurement first and supply-side subsidies second,and supply-side subsidies and demand-side procurement concur.This study helps deepen the understanding of demand-side innovation support policies and provides an important reference for further improvement of China's innovation incentive policies.

Prediction of Listed Company Innovation Ability Based on Attention Mechanism

Innovation is the center of the enterprise development, which is the main driving force of enterprises’ competitiveness. To evaluate the enterprises’ innovation ability, we firstly establish an index system which aims at analyzing the enterprise innovation ability. We also retrieve the data of the listed companies in Wind database from 2015 to 2019 and label them using factor analysis method. Then, a new deep learning classificational framework with attention mechanism and LSTM is established. The results show that when attention mechanism and LSTM are added into the convolutional neural network(CNN), the model’s prediction performance is better improved, and the accuracy, recall, precision and F-score are 0.914, 0.914, 0.916 and 0.915, respectively. This indicates the strong generalization ability of our new model. Finally, we also find that patents and R &D expenditures are the most important factor affecting the corporate innovation ability through SHapley Additive exPlanations(SHAP). Companies with more patents and R &D expenditures are generally considered to be more innovative.