How State Ownership Affects Firm Innovation Performance: Evidence from China

Innovation plays a vital role in economic development. This paper examined the effect of state ownership on firm innovation as well as the moderating roles of R&D capability and marketization by Chinese firm-level data from Chinese Industrial Enterprises (2008-2011) and listed companies (2007-2016). The theoretical and empirical study verified that state ownership positively influences firm innovation, and firm's R&D capability and the degree of marketization have significant positive moderate effect. The result was robust in a series of checks such as using lagged data, adopting alternative identification methods and variables, and using independent replication. The conclusion provided implications for the management of Chinese firms. The unique innovation pattern of Chinese firms also provided enlightening experience to other emerging economies.