Enterprise rent-seeking and high-quality development: A perspective based on institutional deficiencies

Based on the puzzle of mismatch between China's current innovation environment construction and firms' innovation achievements, this paper uses data of Chinese A-share listed firms and tries to explore whether rent-seeking is a strategic choice for firms to achieve high-quality development in the context of institutional deficiencies. This paper finds that (1) corporate rent-seeking can significantly increase total factor productivity (TFP), a result that still holds after various robustness tests such as the instrumental variables method. The mechanism test finds that corporate rent-seeking can significantly incentivize corporate innovation, especially high-quality innovation. (2) Rent-seeking has a stronger effect on TFP in high-tech enterprises, patent-intensive industries, and non-overcapacity industries; institutional factors such as the reasonableness of the government-market relationship and the degree of distortion in the factor market have a significant negative and positive moderating effect on the promotion of TFP by rent-seeking, respectively. Further sub-sample tests show that the TFP promotion effect of rent-seeking in firms with stronger willingness and demand for innovation is more influenced by the institutional environment factors. The above results suggest that rent-seeking can act as an alternative means for firms to satisfy their innovation needs in the absence of institutions, and thus increase TFP. (3) Industry-based tests show that rent-seeking can promote overall technological progress, but it does not have the "lubricant" effect of optimizing the allocation of resources, and rent-seeking is always a suboptimal choice for the allocation of resources. Unlike previous studies that emphasized the negative consequences of rent-seeking, we highlight the potential benefits of rent-seeking in the context of China's transition economy from a total factor productivity (TFP) perspective, which enriches the research in the area of rent-seeking and TFP.