How the Government's"Picking Winners"Strategy Influences the Innovative Behavior of Firms:An Assessment of the Effectiveness of Preferential Policies for Small and Medium-Sized Technology-Based Enterprises
The government's"picking winners"strategy is considered a crucial type of industrial policy and a successful experience for"developmental states".This study examines how the Chinese government's policies of"picking winners"influence the innovative behav-ior of firms.Using data from the listed firms on the"New Third Board"from 2018 to 2019,we employ propensity score matching to as-sess the effects of preferential policies on small and medium-sized technology-based firms.We find that,while the policies encourage firms to invest more in R&D and apply for more patents,firms are motivated to respond with"strategic innovation"rather than"substan-tive innovation"to obtain the benefits provided by the policies.Furthermore,policy effects vary among firms with different ownership structures,in different regions,and across industries.It is suggested that to effectively incentivize substantive innovation through the government's"picking winners"strategy,a more rational policy design coupled with robust governmental capabilities is necessary.