“Minor offenses with heavy penalties “or” equivalent penalties ":Whether the business environment construction can support the breakthrough and innovation of enterprises

Mingxiong Bi, Xiaofen Jiang and Ruoyu Dai

International Review of Economics & Finance, 2025, vol. 102, issue C

Abstract: A well-functioning business environment can promote innovation activities. In recent years, many studies have examined the relationship between the business environment and innovation, but the focus has largely been on the market economy, neglecting the impact of the rule of law business environment. Unstable regulatory enforcement by public personnel can affect enterprises' external environment assessments and decision-making. Therefore, using data from Chinese listed companies and provinces from 2008 to 2022, this study employs a two-way fixed effects model for empirical analysis to explore the impact of the rule of law business environment on enterprises' radical innovation, drawing the following conclusions. When administrative personnel strictly enforce laws, minor offenses with heavy penalties can degrade the local business environment and have a negative impact on enterprises’ radical innovation, and rent-seeking has a mediating role. The suggestions we propose are that law enforcement personnel should standardize regulatory enforcement, adhere to a combination of punishment and education, and strengthen the awareness of equivalent penalties. Furthermore, laws and regulations related to rent-seeking should be developed and refined to reduce legal gaps and enterprises should be educated more effectively. Enterprises should also set long term goals, enhance their risk-bearing capacity, maintain a sense of social responsibility, and promote innovative development.

Keywords: Business environment; Enterprise innovation; Rent-seeking; Forfeiture income (search for similar items in EconPapers)
Date: 2025
References: Add references at CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S1059056025004587
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:102:y:2025:i:c:s1059056025004587

DOI: 10.1016/j.iref.2025.104295

Access Statistics for this article

International Review of Economics & Finance is currently edited by H. Beladi and C. Chen

More articles in International Review of Economics & Finance from Elsevier
Bibliographic data for series maintained by Catherine Liu ().