Industrial Policy, Long‐Term Orientation and Export Product Quality

This paper empirically examines the impact of industrial policies on the quality of firms' export products using textual data derived from Chinese local governments' Five‐Year Plans (FYPs). The empirical results demonstrate that key industrial policies significantly contribute to upgrading export product quality, a finding that remains robust across a variety of tests. Given the endogeneity issues, we employ the interaction term of the number of late Qing cabinet ( Neige ) members who were responsible for early industry policy making and industrial capital density as IV, and the instrumented results are consistent with the baseline. Notably, we find that firms with a strong long‐term orientation (LTO) are better able to leverage industrial policies to enhance export quality. Mechanism analysis reveals that industrial policies improve export quality by encouraging innovation and promoting industrial agglomeration. Furthermore, heterogeneity analysis indicates that the positive effect of key industrial policies is more pronounced for private‐owned firms compared to foreign‐owned and state‐owned firms, for ordinary trade relative to processing trade, and in the eastern region compared to the central and western regions.