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The effect of privatization on corporate innovation: New evidence from China’s ownership-transfer-privatization

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  • Shi, Yaya
  • Zhao, Ningru

Abstract

This paper investigates the effect of privatization on corporate innovation utilizing the SOEs’ ownership-transfer-privatization (OTP) in China. Adopting a multiple period difference-in-difference method, we find that privatization significantly reduces the quantity of privatized SOEs’ innovation while increases the quality of privatized SOEs’ innovation. Several robustness checks, which include alternative measures, parallel trends and placebo tests, and the dynamic effect of privatization, are performed to validate our findings. Moreover, we demonstrate that two mechanisms – outside government intervention and inside political connections – drive the identified effect of privatization. Our findings shed new light on the debate surrounding the effects of privatization on corporate innovation.

Suggested Citation

  • Shi, Yaya & Zhao, Ningru, 2024. "The effect of privatization on corporate innovation: New evidence from China’s ownership-transfer-privatization," International Review of Economics & Finance, Elsevier, vol. 93(PB), pages 1198-1211.
    • Handle: RePEc:eee:reveco:v:93:y:2024:i:pb:p:1198-1211
    DOI: 10.1016/j.iref.2024.05.018
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    More about this item

    Keywords

    State-owned enterprises; Ownership-transfer-privatization; Patents; Difference-in-difference;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G38 - Financial Economics - - Corporate Finance and Governance - - - Government Policy and Regulation
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • L33 - Industrial Organization - - Nonprofit Organizations and Public Enterprise - - - Comparison of Public and Private Enterprise and Nonprofit Institutions; Privatization; Contracting Out

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