How Does Media Environment Affect Firm Innovation? Evidence from a Market-Oriented Media Reform in China

55 Pages Posted: 14 Dec 2023

See all articles by Jiatong Liu

Jiatong Liu

Tsinghua University

Xiaoguang Liu

Renmin University of China

Abstract

Exploiting a unique market-oriented media reform initiated in 1996 in China, we investigate the role of media environment in affecting firm behaviour. We find robust evidence that market-oriented media environment is conductive to firm innovation, with the reform promoting patent quantity and quality substantially. The effect is more pronounced for firms with higher information asymmetry. Matching firm data with 1.3 million news reports, we find the market-oriented media reform significantly improves the criticalness and unbiasedness of news coverage and shapes an innovation-friendly environment. Our findings highlight economic outcomes of relaxing media control and underline substantial gains from deepening the reform.

Keywords: Media environment, news coverage, media reform, Firm innovation, information asymmetry

Suggested Citation

Liu, Jiatong and Liu, Xiaoguang, How Does Media Environment Affect Firm Innovation? Evidence from a Market-Oriented Media Reform in China. Available at SSRN: https://ssrn.com/abstract=4665021 or http://dx.doi.org/10.2139/ssrn.4665021

Jiatong Liu

Tsinghua University ( email )

Beijing, 100084
China

Xiaoguang Liu (Contact Author)

Renmin University of China ( email )

Beijing

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