Impact of Public Policy on Innovation : Evidence from Chinese High-Tech Companies

This study examines the role of public policy on technological innovation in 491 Chinese high-tech companies given its significance to national economic development with governments world-wide issuing ambitious policies to help companies innovate. We utilize data from 2006 to 2019 and uniquely undertake textual analysis to convert unstructured policies data into structured data. Employing the system GMM and Poisson regression, we find that Chinese government policies targeting high-tech companies have a positive impact on innovation and promotes high-quality invention patents. The study also delineates that the Chinese intellectual property policies promulgated by the government has a long-term positive impact on the innovation of high-tech companies. The study also finds compelling evidence that government policies in distinct geographical regions have disparate levels of support and impact for high-tech enterprise innovations. The study recommends that policies issued by Chinese provincial governments must be strategically aligned with local economic development goals to effectively stimulate innovation of local enterprises and to better facilitate economic growth