Abstract
Based on a micro dataset of Chinese manufacturing firms, we examined the effect of market-oriented reforms on innovation of Chinese manufacturing firms and its mechanisms. Results show the following. (1) The market-oriented reforms significantly improved the innovation performance of Chinese manufacturing firms. Among the various components of the market-oriented process, the development of the product markets had the greatest effect on promoting firms’ innovation. (2) Alleviating the financial constraint of firms and triggering the “competition effect” were important ways for market-oriented reforms to improve innovation performance. (3) The effect of market-oriented reforms on the innovation of various types of firms (different industry types, scale types, ownership types, regional types, exporters and non-exporters) was not the same, and significant heterogeneity was observed. This study enriches the research literature on market-oriented reforms and firms’ innovation and provides new micro evidence for understanding the effect of market-oriented reforms on firms’ innovation performance.
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