Is It Substantive Innovation Or Strategic Innovation?—The Impact Of Macroeconomic Industry Policies On Micro-Enterprise Innovation

In the lately 1980 s, China began to implement industrial policy. Industrial policy is considered to be one of the important reasons for the rapid economic growth miracle in the three decades of China’s reform and opening up. However, as time goes by, especially since the eighteenth national congress of the communist party of China, the malpractice of the selective industrial policy began to emerge, particularly its aggressive character, intervention of government to select alternative characteristics in the market, suppressing the market competition by local protectionism, stimulating the development of large-scale enterprises based of the merger and acquisition of the emerging small and medium-sized enterprises, as well as the pursuit of high-speed growth in some industries that led to the excess capacity, which is incompatible with the current economic development that has entered into a new normal and we need to seek industry phase transformation and upgrading. We analyze the impact of Chinese industrial policy(CIP) on corporate innovation behavior and its internal mechanism. We find that the number of patent application increases significantly in those firms incented by CIP. However, this phenomenon occurs in the group of non-invention patent applications(NIPA), which means that these firms pursued “innovation by numbers” and ignored “the quality of innovation”. When firms expect that they will obtain more subsidies and tax incentives, the number of their patent applications, especially the number of the NIPA increased significantly, which means that the support of CIP induced enterprise to innovate for “support seeking”. To further analyze these phenomena above, we divide the firms into SOE group and non-SOE group, as well as high-tech industry group and non- high-tech industry group. The result of the further analysis is that these phenomena above were significant in SOE group and non- high-tech industry group, which indicated that CIP could only inspire strategic innovation, and the firms innovate for “support seeking”, pursuing “innovation by numbers” instead of its quality. However, company’s market value is improved as their invention patent applications increased. Only substantial innovation can promote enterprises development.