A tale of market-led standardization in emerging economies: evidence from China’s pilot policy for group standards

China's central government has identified group standardization as the core of market-led standardization and a strategic instrument for meeting the demands of market competition and innovation. However, whether, and through which channels, market-led standardization enhances regional innovation in an emerging economy where government-led standardization is already entrenched remains unclear. Using China's pilot policy on group standards as a quasi-natural experiment and employing a difference-in-differences approach on panel data from 232 prefecture-level cities over 2014–2021, this study examines the policy's effect on regional innovation and the role of government fiscal support. Our analysis yields the following results. First, market-led standardization significantly enhances regional innovation, and the finding survives a series of robustness checks. Second, government fiscal investment in science and technology positively moderates the relationship between market-led standardization and regional innovation. Third, market-led standardization promotes regional innovation by improving the allocation efficiency of science and technology innovation (STI) resources and by boosting corporate investment demand.