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Does Factor Market Distortion Inhibit Enterprise Innovation? Empirical Evidence from Chinese Industrial Enterprises

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  • Meixia Wang

    (Xi’an University of Technology)

  • Yunxia Wang

    (Shenzhen Technology University)

Abstract

Using 2009–2013 data on Chinese industrial enterprises, this paper empirically tests the impact of factor market distortion on enterprise innovation and finds that it has a significant inhibitory effect. A more serious factor market distortion results in a stronger inhibitory effect. For enterprises with different characteristics, the inhibitory effects of factor market distortion on innovation differ substantially. Enterprises and entrepreneurs may exploit the rent-seeking opportunities generated by factor market distortion to earn income to reduce innovation activities. For enterprises with different ownership systems, regions, and factor densities, significant differences exist in the impact of factor market distortion on their innovation capabilities. Therefore, we should accelerate the process of factor market reform, reduce the direct intervention of the government in market activities and its control over factor resources, and eliminate the motivation of enterprises to engage in rent-seeking to earn income.

Suggested Citation

  • Meixia Wang & Yunxia Wang, 2024. "Does Factor Market Distortion Inhibit Enterprise Innovation? Empirical Evidence from Chinese Industrial Enterprises," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 12830-12853, September.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:3:d:10.1007_s13132-023-01590-5
    DOI: 10.1007/s13132-023-01590-5
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