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Regulation and product innovation: the intermediate role of resource reallocation

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Innovation, Catch-up and Sustainable Development

Part of the book series: Economic Complexity and Evolution ((ECAE))

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  • The original version of this chapter was revised as the Copyright holder name, Copyright year information were incorrectly mentioned and as well as the footnote information was missed to be included to the chapter. A correction to this chapter can be found at https://doi.org/10.1007/978-3-030-84931-3_17
  • Reprinted by permission from Springer Nature: Springer Nature, Journal of Evolutionary Economics, Regulation and product innovation: the intermediate role of resource reallocation, Fang Wang & Xiaoyong Da, 2020 (https://doi.org/10.1007/s00191-020-00676-6)

Abstract

Regulation has been identified as an important determinant of the innovation activities of companies, industries, and entire economies. As such, this paper investigates the potential effects of regulation on the innovative performance of firms in China. We identify an inverted U-shaped relationship between regulation and product innovation performance. That is, in China, regulation plays a positive role in promoting innovation: the more actively firms deal with regulations within certain threshold levels, the better their product innovation performance is. However, after reaching the threshold, the relationship reverses. Further, actively coping with regulations facilitates firms’ access to financial resources, which in turn promotes product innovation. Meanwhile, output distortion significantly impedes product innovation performance. However, regulation does not show a measurable impact on output distortion.

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Change history

  • 08 September 2022

    The book was inadvertently published with its Chapters 6, 7, 10, 11, 12, 14, 16 having an incorrect “Copyright Holder Name” and “Copyright Year” information. The reprinting information in the footnotes of these Spin-Off chapters were also missed to be included to these 7 chapters.

Notes

  1. 1.

    The survey question asked “In a typical week, over the last year, what percentage of the total senior management’s time was spent on dealing with requirements imposed by government regulations?” Some examples of government regulations are taxes, customs, labor regulations, licensing and registration, including dealings with officials and completing forms.

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Acknowledgments

The authors are grateful for discussion with the attendants in the International Conference on “Innovation, Institutions, and Governance” 2017 in Tallinn and the 17th International Schumpeter Society Conference on “Innovation, Catch-up, and Sustainable Development” 2018 in Seoul. The usual disclaimer applies.

Funding

This study was funded by the National Natural Science Foundation of China (grant number 71503247 and 71804140), the Beijing Social Science Foundation (grant number 15JDJGA040), and Institutes of Science and Development, Chinese Academy of Sciences (grant number Y9X3581H).

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Authors and Affiliations

  1. Institutes of Science and Development, Chinese Academy of Sciences, 15 Zhongguancun Beiyitiao, Beijing, 100190, People’s Republic of China

    Fang Wang

  2. School of Economics and Finance, Xi’an Jiaotong University, Xi’an, China

    Xiaoyong Dai

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  1. Fang Wang
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Correspondence to Fang Wang .

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Editors and Affiliations

  1. Department of Innovation Economics, University of Hohenheim, Stuttgart, Germany

    Andreas Pyka

  2. Department of Economics, Seoul National University, Seoul, Korea (Republic of)

    Keun Lee

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Wang, F., Dai, X. (2020). Regulation and product innovation: the intermediate role of resource reallocation. In: Pyka, A., Lee, K. (eds) Innovation, Catch-up and Sustainable Development. Economic Complexity and Evolution. Springer, Cham. https://doi.org/10.1007/978-3-030-84931-3_7

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