Study On The Impacts Of Infrastructure Services To Business Innovation

Since reform and opening up, infrastructure condition of vigorous development is a prominent feature of the rapid economic development in China, This is compared with the failure to achieve economic take-off of the developing countries, in stark contrast. "Chinese miracle", many scholars will advance infrastructure development as an important explanatory factor. According to the new classical theory of economic growth, economy can maintain rapid growth in the long run which must be accompanied by total factor productivity growth. If infrastructure does contribute to "China miracle", it should be closely linked with technological innovation of enterprises. However, previous scholars mostly focused on its impacts on economic growth and industrial development. Few researchers discussed its possible impacts on firm innovation at micro level. Moreover, during the process of innovation, a firm not only pays attention to infrastructure investment volume, but also availability of infrastructure service. Therefore, this study mainly focuses on impacts of infrastructure service on firm innovation.Based on economic growth theory and new economic geography theory, this study analyzes how infrastructure service affects firm innovation at macro, meso and micro level. Theoretical results show that infrastructure will affect elements allocation and innovation path, which could attract human capital, reduce costs and increase innovation capital to achieve the goal of firm innovation. This is the foundation of the following empirical tests.According to the above analysis, this study analyzes the impacts of infrastructure service on firm innovation decision and innovation ability through Heckman two-stage model. The related data source is from World Bank enterprise survey in China. Empirical results show that four kinds of infrastructure services have significant impact on enterprise innovation decision and innovation ability. At the same time, the impacts of four kinds of infrastructure service are quite different which the order from high to low is traffic, telecommunication, electric power and water. Further analysis shows that government support could help to strengthen the active impacts of infrastructure service on firm innovation. The related policy implication is that government should provide much more efficient support to increase the utility of infrastructure service and promote firm innovation.