This study aims to identify factors that affect firms’ engagement in innovation in the manufacturing sector in China. The analysis is carried out using firm-level data obtained from the World Bank Enterprise Survey 2024 with a final sample of 967 firms. The study extends the scope of existing empirical research by incorporating firms of all sizes and including more potential factors that could affect firms’ engagement in innovation. A logit regression model is employed to examine factors that affect the likelihood of engaging in innovation. Firm-specific characteristics, research and development, market environment, and knowledge interaction are included in the model. The evidence reveals that firms engaging in research and development are 6.9 times more likely to innovate compared to those that do not. Moreover, firms of larger size, employing skilled workforce and with greater exposure to international markets through exporting, are more inclined to engage in innovation. Policy fostering innovation should focus on strengthening the internal capabilities of firms through skill upgrading and undertaking R&D activities, while also providing assistance and support to encourage domestically oriented firms, especially small and medium-sized enterprises, to engage in innovation activity.
Yu et al. (Sat,) studied this question.