Study on the Impact of Breakthrough and Incremental Innovation on Firm Capacity Utilization

Abstract

Effectively resolving manufacturing overcapacity is an important way for China to stimulate economic vitality and achieve high-quality economic development. Although research on technological innovation to resolve overcapacity has attracted academic attention, less research has been conducted from the perspective of innovation intensity. This paper uses the panel data of 1447 A-share listed companies in China’s manufacturing industry from 2016 to 2020, based on a two-way fixed effects model. The paper divides technological innovation into two dimensions to explore the impact of breakthrough innovation and incremental innovation on enterprises’ capacity utilization. The results show that both breakthrough and incremental innovations can effectively improve the capacity utilization of enterprises; however, the breakthrough innovation has a greater degree of improvement. The moderating effect shows that a good institutional environment strengthens the positive relationship between breakthrough innovations and the capacity utilization of enterprises. The heterogeneity analysis finds that breakthrough and incremental innovations have a stronger effect on the capacity utilization of state-owned enterprises. This paper further improves the theoretical framework of the relationship between technological innovation and enterprise capacity utilization and provides a theoretical basis and motivation for the Chinese manufacturing industry to resolve overcapacity and respond to the national requirements for high-quality development.