Labor cost, government intervention, and corporate innovation: Evidence from China

Li, J; Shan, Y; Tian, G; Hao, X

Labor cost, government intervention, and corporate innovation: Evidence from China

Li, J Shan, Y

Tian, G Hao, X

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Publisher:: Elsevier BV
Publication Type:: Journal Article
Citation:: Journal of Corporate Finance, 2020, 64, pp. 101668-101668
Issue Date:: 2020-10-01

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Field	Value	Language
dc.contributor.author	Li, J
dc.contributor.author	Shan, Y https://orcid.org/0000-0003-2156-8722
dc.contributor.author	Tian, G
dc.contributor.author	Hao, X
dc.date.accessioned	2020-10-03T22:38:28Z
dc.date.available	2020-10-03T22:38:28Z
dc.date.issued	2020-10-01
dc.identifier.citation	Journal of Corporate Finance, 2020, 64, pp. 101668-101668
dc.identifier.issn	0929-1199
dc.identifier.uri	http://hdl.handle.net/10453/143056
dc.description.abstract	© 2020 Elsevier B.V. We examine the inducement effect of labor cost on corporate innovation in emerging markets. To establish causality, we adopt a difference-in-differences approach, based on the variations generated by the passage of the new Labor Contract Law in China, as well as an instrumental variable approach. We find the inducement effect of labor cost is more pronounced for Chinese non-state-owned enterprises, firms without political connections, and firms with low labor productivity. Our results support the induced innovation hypothesis in that increases in wages will induce invention and technology adoption, but also suggest that government intervention through state ownership and political connections largely decreases this inducement effect. Our findings have implications for emerging markets regarding the transition from a low-cost labor development model to an innovation-driven growth model.
dc.language	en
dc.publisher	Elsevier BV
dc.relation.ispartof	Journal of Corporate Finance
dc.relation.isbasedon	10.1016/j.jcorpfin.2020.101668
dc.rights	info:eu-repo/semantics/closedAccess
dc.subject	1502 Banking, Finance and Investment
dc.subject.classification	Finance
dc.title	Labor cost, government intervention, and corporate innovation: Evidence from China
dc.type	Journal Article
utslib.citation.volume	64
utslib.for	1502 Banking, Finance and Investment
pubs.organisational-group	/University of Technology Sydney/Faculty of Business
pubs.organisational-group	/University of Technology Sydney/Faculty of Business/Accounting Discipline
pubs.organisational-group	/University of Technology Sydney
utslib.copyright.status	closed_access	*
dc.date.updated	2020-10-03T22:38:23Z
pubs.publication-status	Published
pubs.volume	64

Abstract:

© 2020 Elsevier B.V. We examine the inducement effect of labor cost on corporate innovation in emerging markets. To establish causality, we adopt a difference-in-differences approach, based on the variations generated by the passage of the new Labor Contract Law in China, as well as an instrumental variable approach. We find the inducement effect of labor cost is more pronounced for Chinese non-state-owned enterprises, firms without political connections, and firms with low labor productivity. Our results support the induced innovation hypothesis in that increases in wages will induce invention and technology adoption, but also suggest that government intervention through state ownership and political connections largely decreases this inducement effect. Our findings have implications for emerging markets regarding the transition from a low-cost labor development model to an innovation-driven growth model.

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http://hdl.handle.net/10453/143056