Does Industrial Policy Promote Firm’s Innovation?

Whether industrial policies can compensate for market failures and promote the optimization and upgrading of industrial structure have been controversial.On the one hand,industrial policies can help entrepreneurs solve their own external problems that are difficult to overcome.On the other hand,research and data show that the implementation of industrial policies can affect the normal development of the company or the market’s survival of the fittest.In the process of implementation,industrial policies involve a large number of government and social resources.How to identify and properly play the role of industrial policies is particularly important in this situation.In addition,as a source of long-term vigor for enterprises,corporate innovation is increasingly valued by the academic community and the government.Nowadays,many domestic industries now have problems with insufficient innovation capacity.The rise in production costs forces industrial transformation and corporate innovation.With the "twelfth Five-Year Plan" begun to emphasize the "transformation of economic development methods" and pointed out that relying on scientific and technological innovation to promote industrial upgrading,how to speed up the national innovation system,strengthen the dominant position of technological innovation,and guide the correct flow of funds and personnel has become the key issue in the current economic development.Therefore,from the perspective of corporate innovation,we use the key manufacturing industries mentioned in the "eleventh Five-Year Plan" and the "twelfth Five-Year Plan" at the provincial level as the basis,and construct difference-in-differences model to study the impact of provincial industrial policies on the innovation of local enterprises.We find that although industrial policy can promote innovation on the whole,more resources will be used for utility model patents and design patents with lower technical levels,rather than for invention patents that are beneficial to the long-term development of the company.Then we further examine the heterogeneity of the attitude towards industrial policy from the perspective of the ownership,the market environment and the financing constraints of the company.We find that the significant impact of industrial policy on innovation only existed in non-state-owned enterprises,enterprises in the central and eastern regions,and enterprises with strong external financing constraints.This shows that industrial policy can indeed effectively influence innovation,but its effects on different ownership system,different industries and different regions are not the same.Therefore,when concretely implementing industrial policies,the government should analyze the specific situation of the enterprise,and should not impose uniformity on the implementation of the policies.At the same time,it also provides direction for how to formulate a reasonable industrial policy.