Innovations differ substantially in their qualities, from major breakthroughs to small incremental refinements. What is the relationship between product market competition and the quality of innovations? We develop a model where competition encourages high-quality firms to innovate but discourages low-quality firms from innovating and examine the impact of competition on the quality of innovations, taking the implementation of the negative list system for market access in China as a natural experiment. It is found that competition has twofold impacts on the incentives of innovation and that competition improves the overall innovation quality through the improvement of innovation resource allocation. More competition implies a higher elasticity of substitution, leading to stronger incentives for innovation. Meanwhile, competition also decreases industry profits and increases the cost of innovation, which reduces the expected return on innovation, resulting in fewer incentives for innovation. The findings suggest that while R&D subsidies increase aggregate R&D investment, they encourage the survival and expansion of low-quality firms at the expense of high-quality firms and lead to misallocation of R&D resources, resulting in the decline of overall innovation qualities.
The digital economy enabled by digital technologies is reshaping economic and social development, bringing a digital revolution to entrepreneurship and innovation. Does the digital economy realistically translate into excellence in microentrepreneurial ventures, and do business incubators still play an important role in the digital era? There is a lack of sufficient evidence in this area. This study combines macro and micro perspectives, economics, and management perspectives and examines the relationship between regional digital economy development and incubates performance using a panel fixed effects model based on a large sample of data from Chinese technology business incubators and their incubates. Robustness tests were also conducted by the instrumental variable’s method and other conventional methods, and the stepwise regression method was used to set up a mediating effect model of incubation service support to test the mechanism of the impact of the digital economy on the performance of incubated enterprises. The results of this study show that the development of the digital economy in cities helped improve the revenue capacity of startups, and the more developed the digital economy is, the better the financial performance of startups performs. From a resource-based view, resource service support from incubators, such as capital, technology, human resources, and knowledge, is an important channel through which the digital economy promotes the performance of startups. This study provides new perspectives and additions to theoretical and empirical studies of the digital economy and entrepreneurship development and provides policy and management insights for the development of the business incubation industry from the digital economy perspective.
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