The incentive transmission gap in China’s functional SOE classification reform: full-population evidence from Beijing Municipal enterprises

Classification-based governance reforms assume differentiated missions shape organizational behavior through corresponding performance incentives. This study tests whether mission differentiation is translated into incentive differentiation in China’s functional classification reform of state-owned enterprises. Using the complete population of 42 Beijing municipal SOEs from 2018 to 2023, we construct a Mission Differentiation Index (MDI) and an Incentive Differentiation Index (IDI) from systematic coding of SASAC governance documents and link them to panel evidence on capital allocation and capability accumulation. Incentive differentiation reaches only 46% of the level implied by mission differentiation, with the largest gap among Special-Function enterprises, whose evaluation systems rely heavily on standards borrowed from other enterprise types. Wider gaps are associated with stronger path dependence in core-business allocation and weaker responses to government reorientation signals. Capability accumulation also diverges: Special-Function enterprises show high interannual volatility consistent with multitask incentive imbalance, whereas Urban Public Service enterprises display negative resource–capability elasticity consistent with soft budget constraints. The findings identify an incentive transmission gap as a critical implementation mechanism, showing that classification reform requires not only differentiated missions but also evaluation systems that translate them into substantive incentives.