State ownership and innovations: Lessons from the mixed-ownership reforms of China's listed companies

Mixed-ownership reforms have been the mainstay of reforming China's state-owned enterprises (SOEs) in recent years. In relation to the broader context of the continuous slowdown in economic growth under the New Normal, the reshaping of the innovative capacity of SOEs has been widely considered to be of systemic importance. Yet, in the relevant literature, the effects of mixed-ownership reforms on innovations have remained unclear. This paper seeks to contribute to the literature by means of studying such effects for China's listed companies in the period 2007–2018, from the theoretical perspective of organizational controls in innovative firms. Our study finds that SOEs tend to be more innovative than non-SOEs, and increases in state shareholding do raise the innovative capacity of mixed-ownership enterprises. Further analyses reveal that, for mixed-ownership enterprises, the lower the level of state shareholding the more reliance of innovations on the capability of organizational controls in corporate governance. These findings offer useful policy lessons for China. Additionally, we discuss the contribution of our study to the broader literature at a conceptual level, with an emphasis on the novelty of highlighting the importance of organizational controls in the reform of SOEs.