Government Land Resource Allocation And Corporate Innovation

Land resource allocation has been the key to driving China’s rapid economic development in the past decades.Academics and policymakers are preoccupied with optimizing the allocation of land resources in the new development stage to support the innovative growth of the economy.The research focuses on enterprise innovation and systematically assesses the impact of different allocation methods on enterprise innovation based on sorting out land resource allocation methods in China.The aim is to provide micro evidence and solutions to China’s current dilemma of insufficient effectiveness of land resource allocation.The way of allocating land resources in China presents a series of typical characteristics,all of which are profoundly influenced by the evolution of China’s economic transition and a series of economic system reform policies introduced during this period.First,the allocation of land factors in China is dominated by government departments.The guidance of the allocation methods and efficiency of other resources,including innovation resources,plays an essential role in economic development.Second,since the tax-sharing reform of China in 1994,two primary land resource allocation methods have been developed to alleviate the financial constraints of local governments and develop the local economy:"land fiscal",in which land use rights are granted to obtain funds,and "land finance",in which land use rights are mortgaged to obtain loans.Third,the profound combination of the promotion incentive mechanism for officials and land allocation has contributed to rapid economic development but has also resulted in the dilemma of inefficient allocation of land resources and impeded high-quality economic development.A large number of valuable studies on the causes and economic effects of land resource allocation in China have been conducted.After combing through the relevant institutional background and literature,the following three aspects can extend the study.First,the two primary methods of government land allocation are incorporated into a unified analytic framework to examine the impacts on innovation.Second,the economic impact of government resource allocation is extended to the micro level to study the impact and mechanism of land resource allocation from the public sector on enterprise innovation.Third,mismatch indicators of land resources are improved to analyze the impact of land resource mismatch on enterprise innovation at the regional and industry levels to provide micro-level basis and methods for optimizing land resource allocation and promoting economic innovation development.Therefore,the general research logic of the paper is to study the promotion effect and crowding out effect of the two primary land resource allocation methods,namely,land fiscal and land finance,on enterprise innovation through theoretical derivation and empirical analysis from the perspective of land resource allocation methods and efficiency.On this basis,the inhibitory effect of insufficient effectiveness of land resource allocation on enterprise innovation is further studied from the perspective of mismatch between industry and region.Specifically,the main research contents and findings are as follows:First,different land resource allocation methods can have heterogeneous effects on enterprise innovation.Based on the analysis of theories,including financing structure and market failure,and incorporating government land resource allocation into enterprises’ optimal R&D decision model,the impact of land resource allocation methods on enterprise innovation is analyzed theoretically.One of the findings is that the land resources allocation with the "land fiscal" style will affect enterprise innovation by increasing enterprise profits,altering R&D subsidies,and improving enterprise financing,whereas the land resources allocation with the "land finance" style will affect enterprise innovation by increasing enterprise profits,altering R&D subsidies,and worsening enterprise financing.In addition,land resource mismatch will inhibit enterprise innovation by altering firm investment.Second,the land resources allocation with the "land fiscal" style encourages enterprise innovation by promotion effect.Local governments raise substantial funds for economic construction and alleviate their budget constraints by granting land use rights.In this paper,plot-level land transfer data from LandChina.com has been collected,and the indicators of city-level land-transferring fees are obtained by summing up plot-level land transfer data.These obtained data are used as a proxy variable to study the impacts of land fiscal on enterprise innovation.The research finding is that land fiscal significantly promotes enterprise innovation,primarily through boosting enterprise earnings income and the resulting increase in financing.Further heterogeneity analysis reveals that land fiscal promotes innovation more for enterprises in the eastern and central regions and SOEs and mainly increases the output of higher-quality innovation such as invention and utility model patents.Third,the land resource allocation with the "land finance" style inhibits enterprise innovation by the crowding out effect.As the central government tightens the land policies,the amount of land available for transferring is decreasing,and land finance has gradually become the primary method for local governments to allocate land resources.By mortgaging land use rights or bringing them into municipal investment platforms,local governments have raised substantial funds for economic construction.In this paper,debt data of municipal investment platforms have been collected,and the indicators of city-level municipal investment debts are obtained by summing debt data up.The obtained data is used as proxy variables to study the impact of land finance on enterprise innovation.The research finding is that land finance significantly inhibits enterprise innovation primarily by crowding out the size of corporate bond issuance.In particular,although land finance promotes enterprise innovation through the profitability mechanism,this effect is not dominant.Further,land finance reduces the quality and efficiency of enterprise innovation and has a more significant inhibiting effect on SOEs’ innovation.Fourth,with the promotion incentive for government officials,the land use strategy from local governments,namely "excessive transfer of industrial land at low prices and limiting transfer of commercial and housing land at high prices",has led to a mismatch of land resources at the industry level,which in turn has a inhibitory effect and inhibits enterprise innovation.In order to win political championships and promote rapid growth of the local economy in the short term,local governments prefer the excessive transfer of industrial land at low prices.This land use strategy directly leads to land price distortion,land resource mismatch,and other resource mismatches,including innovation resources.In the paper,the OP covariance between city-industry total factor productivity and the share of land transfer is calculated based on excluding land sources as existing construction land as proxy variables to study the impact of industry-level land resource mismatch on enterprise innovation.The research finding is that industry-level land resource mismatch inhibits enterprise innovation,and this inhibiting effect is primarily caused by increasing firm real estate and financial investment.In addition,industry-level land resource mismatch reduces both enterprise innovation investment and innovation quality and has a more significant inhibiting effect on enterprises in the eastern,western,and northwestern regions.Fifth,to strike a balance between efficiency and equity,the central government has gradually tightened land supply in the east and increased land supply in the central and western regions.These actions have exacerbated the mismatch of land resources at the regional level,inhibiting enterprise innovation.China has gradually increased the supply of land factors to the central and western regions since 2003 in order to promote its economic development.Under this circumstance,land resource allocation in China has also generated a mismatch problem at the regional level.Similarly,the OP covariance between urban total factor productivity and the share of land transfer has been calculated based on excluding land sources as existing construction land as proxy variables to study the impact of land resource mismatch on enterprise innovation at the regional level.The research finding is that regional-level land resource mismatch inhibits enterprise innovation by increasing firm real estate and financial investment.In addition,regional-level land resource mismatch reduces innovation quality and efficiency.It inhibits regional innovation by altering government investment bias,intensifying the degree of urban industry hollowing,and lessening intellectual property protection.Overall,the theoretical logic of land resource allocation affecting enterprise innovation has been clarified in the research,and the study of the economic impact of land factor allocation has been extended to the enterprise level.The three primary innovations are as follows:First,the impact of two primary land resource allocation methods,land fiscal and land finance,on enterprise innovation is studied,and the regional-level and industry-level land resource mismatches and their impacts are distinguished from an allocation-efficiency perspective.Second,an optimal R&D decision model for enterprises incorporating government land resource allocation is constructed and combined with empirical analysis to verify the impact of land resource allocation on enterprise innovation and the mechanism,thereby establishing a feasible analytical framework for similar studies.Third,by crawling more detailed microdata,more precise land allocation methods and efficiency indicators are constructed,which can extend the depth of research questions and provide new empirical ideas.Specifically,based on the data of nearly 3 million plots released by LandChina.com,the OP covariance method is used innovatively to construct indicators of regional-level and industry-level land resource mismatch,which in turn helps to examine the problem of insufficient effectiveness of land resource allocation,meanwhile,the Bartik instrumental variable introduced in the paper also provides new ideas for similar studies to address the endogeneity problem.The following insights are drawn for the research based on the abovementioned findings.This paper argues that the innovative and promotive role of land resource allocation should be given full play,and at the same time,measures should be taken to reduce the crowding-out effect and inhibitory effect of land resource allocation.On the one hand,the central government should take measures to optimize the institutional mechanism,fundamentally alter the land transfer strategy of local governments,and improve the efficiency of land resource allocation.Specifically,the measures should start from the following three points:the first measure is to promote land-market reform and break the monopoly position of local governments in the land market,thereby fundamentally addressing the mismatch of land resources;the second measure is to encourage reform of the fiscal and taxation system to address the institutional basis for land finance and land finance;third measure is to promote the system of inter-provincial transfer of land indicators to increase efficiency while preserving equity.On the other hand,local governments should allocate resources rationally to promote high-quality economic development.There is market failure in the innovation market,and the government needs to play the "visible hand" role.First,local governments should moderately tilt resources to innovation-related fiscal spending,such as science and technology education;second,local governments should adhere to the principle of moderate debt issuance and adhere to both economic growth and risk prevention;third,local governments should increase their efforts to streamline financing for private sectors and open up green channels for enterprise innovation.