Symbolic or substantial? Different responses of state-owned and privately owned firms to government innovation policies

Abstract

What influences a firm's response to government innovation policies? This study draws upon the institutional logic perspective to propose that China's state-owned enterprises, guided by state logic, are more likely to make a substantial response to such policies—a response that takes the form of the increased volume of invention patent applications, a steady grant rate, and market-related expenses. In contrast, private firms, guided by market logic, are more likely to make a symbolic response in terms of the increased volume of invention patent applications, a reduced grant rate, and increased market-related expenses and revenues. Results from our study, which uses a quasi-experimental approach based on an exogenous government innovation policy and data on publicly listed Chinese companies, support our arguments. These findings deepen the scholars' understanding of the effects of policy on state-owned and private firms.