Does administrative monopoly affect enterprise innovation? An empirical analysis based on the perspective of factor mismatch in China

In the process of reforming from planned economy to market economy, the phenomenon of administrative monopoly has had a far-reaching impact on the development of China’s economy. Based on the perspective of factor mismatch, this paper examines the impact of administrative monopoly on enterprise innovation and its realization path, utilizing panel data from 30 Chinese provincial regions spanning 8 years from 2008 to 2015. The results of the study show that administrative monopoly significantly hinders the innovation activities of enterprises, showing a negative impact on both the output and input sides of innovation. By triggering factor mismatch, administrative monopoly has a hindering effect on enterprise innovation activities. Specifically, the intervention of administrative monopoly in the market leads to the mismatch of capital and labor factors in the market. When the interaction terms of administrative monopoly with capital mismatch and labor mismatch are added to the empirical model of administrative monopoly, it is found that the hindering effect of these interaction terms on enterprises is greatly enhanced. In the case of a single factor of capital mismatch and labor mismatch or the co-existence of both factors, their hindering effect on firms’ innovation is significantly enhanced. In addition, it is also found that capital mismatch has a more serious hindering effect on firm innovation than labor mismatch.