Social Credit System Construction and Corporate Innovation Investment

Abstract

This paper utilizes data from Chinese A-share listed companies from 2018 to 2024, employing the establishment of National Social Credit System Construction Demonstration Zones as a quasi-natural experiment. We apply a Difference-in-Differences (DID) model to evaluate the impact of the construction of these demonstration zones on corporate innovation investment. The empirical findings reveal that the establishment of social credit demonstration zones significantly promotes corporate innovation investment. This core conclusion remains robust after a series of robustness checks and addressing potential endogeneity concerns. Further analysis of the transmission mechanism indicates that the policy primarily influences corporate innovation investment by alleviating financial constraints. Heterogeneity analysis shows that the policy’s positive effects are more pronounced for state-owned enterprises (SOEs), technology-intensive firms, and firms located in regions with higher levels of economic development. The findings of this study not only provide a rigorous quantitative assessment of the effectiveness of the social credit demonstration zone policy in boosting corporate innovation but also offer empirical evidence and practical implications. This evidence supports the view that the construction of social credit demonstration zones serves as a crucial external institutional environment for fostering corporate innovation, thereby contributing to China’s high-quality development.