State ownership and innovation: the relative merits of local and central state judged by innovation performance

Jing Cai* (Corresponding Author), Radomir Tylecote, J. Ignacio Canales , Takahiko Kiso

*Corresponding author for this work

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This paper compares the innovation performance of state-owned firms owned by different levels of government, with that of privately-owned firms. Analysis of a 116-firm panel dataset for the Chinese solar photovoltaic industry from 1999-2015 suggests that government’s financial support increases the quantity of innovation outputs. However, the efficiency in utilising the financial resources is determined by the effectiveness of agency relationships. Applying agency theory to the Chinese politico-economic context indicates that innovation quality depends on length and complexity of agency chains, engagement of monitors, and the tenure of managers. By using forward citations and proportion of patents in active use, two measures of innovation quality that are more valid and reliable than patent counts, our study finds that municipallyowned firms are superior in terms of innovation productivity to those under central ownership,
and comparable to private firms.
Original languageEnglish
Article number2150026
JournalInternational Journal of Innovation Management
Early online date23 Jul 2020
Publication statusE-pub ahead of print - 23 Jul 2020


  • agency theory
  • governance of innovation
  • level of state ownershi
  • innovation performance
  • solar photovoltaic industry
  • Innovation performance
  • Level of state ownership
  • Solar photovoltaic industry
  • Governance of innovation
  • Agency theory


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