How Can Local Policy Uncertainty Encourage Firm Innovation: A Competitive Advantage Channel. (12th February 2023)

• Record Type: Journal Article
• Authors: Ni, Xiaoran
• Is Part Of: Asia-Pacific journal of financial studies. Volume 52:Number 1(2023)
• Page Start: 35
• Page End: 62
• Publication Date: 2023-02-12
• Subjects: Local Policy Uncertainty -- Firm Innovation -- Competitive Advantage -- Government Connection -- State‐owned Enterprises; Pacific Area -- Economic conditions -- Periodicals; Finance -- Asia -- Periodicals; Finance -- Pacific Area -- Periodicals; Asia -- Economic conditions -- Periodicals; 332.09505
• DOI: 10.1111/ajfs.12411
• Languages: English
• ISSNs: 2041-9945

Abstract

Abstract: Exploring the turnover of city heads in China, I find that state‐owned enterprises (SOEs), which possess competitive advantages (especially resource‐based) due to innate government connections, significantly increase innovation compared with non‐SOEs when local policy uncertainty heightens. In particular, when the turnover of city heads occurs, SOEs are able to obtain a larger amount of external financing at lower costs than non‐SOEs. Additionally, SOEs that file invention patents at the height of local policy uncertainty have better product market performances. My findings indicate that heightened local policy uncertainty enables firms with innate government connections to explore first‐mover advantages through innovation activities.