State-owned enterprises fail to drive regional technological diversification: evidence from China

This article delves into the intricate relationship between state-owned enterprises (SOEs) and regional technological diversification in China. It highlights the ubiquitous role of government participation in research and development (R&D) and innovation, with a particular focus on the impact of SOEs on the emergence of new technologies. The study reveals that a higher share of SOEs in the local economy negatively affects a region's capacity to diversify into new technologies, challenging the conventional wisdom that SOEs drive technological advancement. Through a detailed analysis of patent data and regional economic indicators, the article uncovers the underlying mechanisms that hinder SOEs' ability to foster technological diversification. It explores how SOEs' cooperative behavior, particularly their reluctance to engage with private-owned enterprises (POEs), obstructs the flow and recombination of knowledge, thereby impeding the development of new technologies. The article also examines the path-dependent nature of regional diversification, demonstrating how SOEs' presence can lock in existing technological capabilities, preventing regions from exploring new technological frontiers. Furthermore, the study provides insights into the broader implications of state capitalism on economic development, suggesting that excessive government control can stifle innovation and hinder regional economic growth. By offering a comprehensive and empirical examination of the SOEs' role in technological diversification, this article contributes to the ongoing debate on the effectiveness of state-led innovation policies and their impact on regional economic development.