Does Corporation Reform Improve Military Enterprises' Total Factor Productivity?

As the main force of national defense industry,military enterprises undertake the important task of research and production of advanced weapons and equipment.Their development status is related to national security and people's livelihood economy.Since January 3,2018,all the twelve major military industrial groups have been transformed into a corporation system,marking a new stage for China's national defense industry.However,up to now,there is still a lack of accurate estimation of the production efficiency of military enterprises,which maintain the basic attribute of "state-owned unlisted" in the core military business sector,and the effect of restructuring of military enterprises is also lack of accurate evaluation.This paper manually collates the historical data of the development of each military industrial enterprise since the Third Front Construction,accurately matches the date with China Industrial Enterprises Database and constructs a panel data.Based on the data,we calculate TFP during 1998-2007 from the firm level in term of OP method.Using the calculation as the standard,we further evaluate the effect of the military enterprises' corporation reform.We draw the following conclusions.In the stage of deepening corporation reform,the TFP of military enterprises showed a trend of development,which increased from 1.13 to 2.72 in 10 years,but in general,the military enterprises' TFP is 39.1% lower than that of national manufacturing TFP,indicates that the management system of military industrial enterprises is rigid and the production efficiency is low.At the same time,average TFP growth rate of military enterprises is 10.46%,which is 2.2 times of manufacturing enterprises.As for military industry itself,the TFP of central military enterprises and the military enterprises in the project of 156 key event are lower than local military enterprises,but the development potential is greater.In evaluating the effect of the corporation reform,we find that the reform can significantly improve the TFP of the military industrial enterprises,the result is verified by various econometrics method;there is a time trend in the effect of restructuring,but in general,the effect of restructuring is sustainable.Expanding market share will significantly reduce the effect of the restructuring and there is no clear correlation between the industrial concentration and the effect of the restructuring.The reason is that the military enterprises mainly rely on the government's support rather than the market competition in the market expansion.In the heterogeneity test,this paper finds that the effect of reform of military enterprises decreases from the west to the east,and the market participation of central militaryenterprises is higher than that of local military enterprises.Through the test of intermediary effect,we believe that the reform is mainly to improve the total factor productivity by improving the sales of enterprises,reducing the ratio of fixed assets of military enterprises and reducing the agency cost.