The High-tech Enterprise Certification Policy and Innovation: Quantity or Quality?

The debate on industrial policy is a hot issue in both academic studies and policy practices. Empirical evidence on the relationship between the high-tech enterprise certification policy and innovation is mixed, with focus on innovation quantity and neglecting innovation quality or green innovation. This study draws insights from government support theory to estimate the effects of certification on the quantity and quality of inventions and green inventions. By using China’s listed firms from 2008 to 2017 through the panel fixed effects model, this study confirms the negative effects of certification on the quantity and quality of inventions and green inventions. Compared with non-high-tech firms, high-tech firms have higher green invention quantity in the fourth year before certification, higher quantity and quality of inventions in the third certification, and higher innovation quantity and quality in the next five years after the end of the tax incentive period. Moreover, financing constraints and R&D investment have masking effects, and the negative effects of certification on innovation quantity and quality are weaker if high-tech firms have higher information transparency or cash flow volatility. Furthermore, there are heterogeneous effects of certification on innovation in terms of certification policies, ownership, and firm age. This study raises concerns about policy failure and corporate rent seeking by elaborating that certification does not increase innovation quantity and quantity before and during the tax incentives period. This study also presents fresh insights into the dynamics of certification influences and some policy implications. © 2023, The Author(s), under exclusive licence to Springer Science+Business Media, LLC, part of Springer Nature.