Effects of marketization on the evolution of firms' R&D efficiency: evidence from China

Qingyu Zhang, Xiude Chen and Mei Cao

International Journal of Emerging Markets, 2022, vol. 19, issue 5, 1335-1358

Abstract: Purpose - Previous studies demonstrate that market-oriented reform has contributed significantly to China's economic growth from the efficiency-based economic view. But some argue that state-owned firms have access to policy information, scarce resources, and government support, and thus state-owned firms might foster innovation. This study tries to find out either market force or state ownership helps improve firms' R&D efficiency. Design/methodology/approach - Using data from China's high-tech industry, we employed the fixed-effect stochastic frontier model and the spatial panel Han-Philips linear dynamic regression model to investigate the relationship between market-oriented reform and the dynamic evolution of R&D efficiency in both temporal and spatial dimensions. Moreover, we examined whether the relationship is affected in a state-owned economy and an industry protection environment. Findings - The results indicate the following: (1) the R&D efficiency of China's high-tech industry has improved steadily and has converged gradually across its regions during the market-oriented reform; (2) the marketization degree is positively correlated with R&D efficiency and its regional convergence; (3) the state-owned economy and industry protection have significantly weakened the ability of market forces to shape R&D efficiency — i.e. they reduce, rather than enhance, R&D efficiency. Originality/value - This investigation helps understand the drivers of R&D efficiency in transition economies, and the findings are also helpful in defining the boundaries and constraints of market forces.

Keywords: Market-oriented reform; R&D efficiency; Dynamic evolution; Regional convergence; Emerging economy (search for similar items in EconPapers)
Date: 2022
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Persistent link: https://EconPapers.repec.org/RePEc:eme:ijoemp:ijoem-10-2021-1634

DOI: 10.1108/IJOEM-10-2021-1634

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