The innovation effects of the fair competition review system on peer enterprises

Purpose Against the backdrop of innovation-driven development, it is crucial to dismantle institutional barriers and optimize the business environment to stimulate enterprise innovation. This paper investigates the policy effects, mechanisms and effective boundaries of business environment optimization on peer enterprise innovation. Design/methodology/approach This study is based on a quasi-natural experiment using the Fair Competition Review System (FCRS) and a sample of Chinese A-share listed companies on the Shanghai and Shenzhen stock exchanges from 2011 to 2021. Findings (1) The FCRS effectively incentivizes peer enterprises within the target industry’s sector to engage in innovative activities. (2) The FCRS enhances peer enterprise innovation by facilitating the diffusion of technological innovations and reducing transaction costs. (3) The incentivizing effect of the FCRS on peer enterprise innovation has effective boundaries, with stronger effects observed in non-high-tech industries and highly concentrated market structures. (4) The peer enterprise innovation effect of the FCRS is also applicable at the regional level, significantly enhancing the innovation levels of regional peer enterprises. Originality/value This study enriches the literature on the impact of business environment optimization on enterprise innovation and provides policy insights for the government to further implement the innovation-driven development strategy.