Can institutional openness policies enhance corporate technology innovation efficiency?Evidence from the establishment of Free Trade Zone

Abstract

The establishment of Free Trade Zones (FTZs) is a testing ground for deepening reform in the new era. It is a significant endeavour for China to investigate institutional innovation, execute an innovation-driven development strategy, and raise the quality of economic development. This study examines a sample of Chinese A-share listed companies from 2009 to 2022 and explores the positive relationship between institutional openness, represented by China's Free Trade Zone, on corporate technology innovation efficiency. The findings highlight that introducing China's Free Trade Zone can strengthen corporate technology innovation efficiency. Furthermore, the stimulating impacts of China's Free Trade Zone on corporate technology innovation efficiency are attained through alleviating corporate financing constraints and facilitating innovative knowledge flow. Heterogeneous analysis confirms that firms' ownership and industry nature play a critical role. The findings demonstrate how institutional openness can enhance stimulate corporate technology innovation efficiency, support the critical role of openness in stimulating corporate technology innovation capability, and contribute to further institutional openness.

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