 Do economic growth target constraints affect firm innovation?Zhengyong Zhang, Zefeng Xu and Yi Ding Economic Analysis and Policy, 2023, vol. 78, issue C, 373-388 Abstract: Compared with Europe and the United States, there has been a unique phenomenon of high economic growth and low investment in research and development by firms in China. Based on the promotion tournament theory, this study examines the influence of economic growth target constraints on firm innovation, using over 8654 listed manufacturing businesses in 230 prefecture-level cities in China. We demonstrate that hard constraints and top-down amplification significantly inhibit firm innovation, whereas soft constraints promote it. Additionally, the inhibitory effect is considerably pronounced on breakthrough innovations, as well as in eastern regions and for SOEs. There is also preliminary evidence that hard constraints inhibit firm innovation through two channels: crowding out science and technology innovation expenditures (neglecting innovation) and inhibiting industrial structure upgrades (preferring production). Overall, our study contributes to understanding how macroeconomic growth targets affect firm innovation. The conclusions of our study apply to policymakers in China and other economies that regularly set economic growth targets. Keywords: Economic growth target; Hard constraint; Soft constraint; Firm innovation (search for similar items in EconPapers) Downloads: (external link) Related works: Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text Persistent link: https://EconPapers.repec.org/RePEc:eee:ecanpo:v:78:y:2023:i:c:p:373-388 DOI: 10.1016/j.eap.2023.03.018 Access Statistics for this article Economic Analysis and Policy is currently edited by Clevo Wilson More articles in Economic Analysis and Policy from Elsevier |
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