Does media spotlight really burn innovation? Evidence from China

Abstract

This study investigates whether and how media coverage influences corporate innovation in China as an emerging economy. In sharp contrast to evidence from developed markets (e.g., U.S.), this study demonstrates that media coverage is positively associated with corporate innovation in China. The results hold following a series of endogeneity and robustness tests. We also demonstrate that media coverage largely has a positive influence through improving the information environment and external governance and alleviating financial constraints for innovative firms. Furthermore, the effects of media coverage are more pronounced for firms located in less developed regions of China. Finally, we find that the effects of media coverage are driven by nonofficial rather than official media coverage, and positive (negative) coverage facilitates (impedes) corporate innovation. Overall, this study contributes to the literature by confirming that media coverage may spur rather than burn corporate innovation in emerging markets.