Moderating roles of strategic innovation compensation effect on new quality productive forces and firm performance: Evidence from Chinese A-share listed companies

Abstract

New Quality Productive Forces (NQPF) have become China’s primary policy imperative to drive high-quality development of its economy. However, empirical evidence on the effects of NQPF on firm performance and the conditions that strengthen such effects is limited. Building upon the resource-based view and innovation compensation theory (Barney, 1991; Porter & van der Linde, 1995), this study explores the link between NQPF and firm value and the moderating role of the innovation compensation effect (ICE). Using two-way fixed effects and instrumental variable (IV) analysis, the study examines a panel dataset of 4,256 Chinese A-share listed companies between 2015 and 2024. It finds that NQPF has a positive and significant effect on the long-term value of firms. Although the ICE (measured as the invention patent ratio) does not directly increase the value of a firm, it significantly increases the positive effect of NQPF on firm performance. Furthermore, this moderating role is significantly stronger in non-state-owned enterprises, high-tech industries, and companies in the Eastern and Central regions of China. The results contribute to the existing evidence on NQPF, as they provide micro-level evidence on the value creation mechanism of NQPF and have practical implications for policymakers and firms.