Since the outbreak of the China-American trade friction in 2018, China has faced increasingly severe challenges in key core technology fields. Despite a surge in the number of international patent applications, China's dependence on foreign intellectual property has not diminished, indicating an underlying weakness in innovation quality. Against this backdrop, the “Specialization, Sophistication, Differentiation, and Innovation” (SSDI) policy for small and medium-sized enterprises (SMEs), initiated by China's Ministry of Industry and Information Technology in 2011 and formally implemented in 2018, aims to cultivate “Little Giant” companies that excel in innovation and dominate niche markets. These firms are vital for driving technological innovation, enhancing industrial chain levels, and strengthening international competitiveness. However, while existing research suggests that the SSDI policy has encouraged increased R&D investment and innovation output, there is a paucity of in-depth analysis on whether it effectively improves the quality of corporate innovation. This research aims to contribute to a more comprehensive understanding of the factors that influence innovation policy outcomes. This is crucial for policymakers seeking to refine the SSDI policy and for firms looking to optimize their innovation strategies in the face of evolving market conditions and policy environments.〖HJ*2/5〗
This paper first proposes hypotheses on the impact and mechanisms of the SSDI policy on the technological innovation of “Little giant” enterprises, as well as the differential effects of the policy under varying levels of market transparency through a theoretical model. Further, this paper utilizes data from listed companies on the Shanghai and Shenzhen A-shares market from 2018 to 2023 which is sourced from the CSMAR and CNRDS databases, and employs a multi-period difference-in-differences (DID) method to test the above hypotheses. The research findings reveal that the SSDI policy significantly enhances both the innovation quality and quantity of “Little Giant” enterprises. Moreover, the policy has a gradient promotion effect, meaning that “Little Giant” enterprises outperform provincial and municipal SSDI enterprises in terms of technological innovation levels, and the latter, in turn, outperform other enterprises. By alleviating financing constraints, providing risk compensation, and promoting the accumulation of human capital, the SSDI policy substantially improves the innovation performance of “Little Giant” enterprises. In terms of human capital, it is the high level of human capital that is the key factor in improving the innovation quality of “Little giant” enterprises. Further research finds that the enterprises adopt different innovation strategies under varying levels of corporate information transparency. Specifically, when corporate information transparency is low, “Little Giant” enterprises receiving SSDI policy support tend to opt for strategies that increase the quantity of innovation rather than its quality, thereby engaging in “innovation pandering” behavior. In contrast, when corporate information transparency is high, the SSDI policy effectively promotes the innovation quality of “Little Giant” enterprises. These findings are pivotal as they not only substantiate the SSDI policy efficacy but also highlight the conditional nature of this effectiveness, contingent upon the level of corporate information transparency. By revealing the differential impact of the policy in various market conditions, this study offers valuable insights for policymakers aiming to refine the SSDI policy and for “Little giant” enterprises seeking to optimize their innovation strategies.
The possible marginal contributions of this paper are threefold. Firstly, current research on the effect of the SSDI policy mostly focuses on the quantity of innovation, this paper examines the impact of the policy on both the quantity and quality of enterprise innovation at the same time, which helps to comprehensively assess the effect of the policy. Secondly, most of the existing innovation policies only support technological innovation of enterprises from the aspect of financial support, and lack the design of human capital incentives. This paper not only analyzes the role of financial support of the policy, but also pays special attention to the role of different human capitals in the process of innovation, which provides an important idea for the incentive design of the innovation policy. Thirdly, the impact of innovation policy on the quality of enterprise innovation is controversial, and why the effect of the SSDI policy remains to be further analyzed. Following the information asymmetry theory, this paper analyzes the differentiated innovation strategies that enterprises may adopt under different market transparency conditions, and emphasizes the importance of constructing a transparent and efficient market information mechanism to stimulate the innovation vitality of enterprises.