Can Strategic Emerging Industries Policy Drive Corporate AI Investment? A Dual Agency Cost Perspective

Whether industrial policy can steer firms toward frontier technology depends on internal governance. A difference-in-differences design built around China’s 13th Five-Year Strategic Emerging Industries Plan of 2016 shows that the policy raised AI investment intensity among A-share listed firms by roughly 13% relative to the sample mean. Dual agency costs condition this effect in opposite directions. Equity incentives, which lower Type I agency costs, amplify it, whereas controlling shareholder share pledging, which raises Type II agency costs, attenuates it. Corporate governance thus filters policy intent into frontier technology investment.