Review Reports - Does Human Capital Homogeneously Improve the Corporate Innovation: Evidence from China’s Higher Education Expansion in the Late 1990s

Round 1

Reviewer 1 Report

This paper studies the impact of increased human capital on corporate innovation by utilizing the variation of college enrollment expansion across different 11 regions in China. The aim, hypotheses, and methodology are well defined and discussed. Even though the originality and contribution to theory are not groundbreaking, the paper clearly analyses and discussed what is aimed and found. So, it deserves to be published in the journal.

Author Response

Dear reviewer:

Thank you for your affirmation and praise of our work. As for the originality and contribution to theory, we try to express our marginal contribution clearly by rewriting the discussion section. In this section, we relate our research with three strands of papers: (1) heterogeneous impacts of the college enrollment expansion in China, (2) the impact of education expansion policy on innovation in various counties, and (3) the impact of increasing human capital effect. In each part, we try to compare our paper with mostly related papers, and try to illustrate our contribution. Here is the revised version of the “discussion” section:

“To what extent the increase in human capital brought about by university enrollment has affected the innovation of different industries is an empirical issue worthy of attention. In this regard, the paper selects the policy time of college enrollment expansion as the cut-off point and takes the year of the influx of graduates into the labor market as the policy impact time to observe the changes in corporate innovation in the preceding and subsequent periods. The main finding of this paper is that in China, the college enrollment expansion has brought about two percent more innovation outputs to industries with the highest human capital intensity than industries with the lowest human capital intensity. Though divergent methods, this finding achieves a congruence with Ma (2020) which developed a multi-industry general equilibrium model to analyze the heterogenous influence on industries with different skill intensities. Additionally, our finding is consistent and complementary to Che and Zhang (2018) which views the increasing disparity of R&D activities as one of the reasons why firm productivity is higher in more human-capital-intensive industries.

Broadly, our research shows that policy-driven education expansion could stimulate corporates’ patents by at least 3.7%. To put the magnitude in perspective, it may be helpful to compare it to the impacts of similar education expansion policies in other countries. First, the decentralization of post-secondary education in Sweden enabled a single post-graduate researcher to increase the patents by almost 0.01% (Andersson and Quigley, 2009). This suggests that the Chinese policy conducted a more profound impact than the Swedish owing to broader affected populations and manufacturing firms. Second, in Italy, an opening of the university has caused an increase in regional innovation by 7% (Cowan and Zinovyeva, 2013), which is larger than our estimates. This difference rises because (1) the scale of regional innovation is broader than the corporate innovation, reflecting more spillover effects of education expansion policy, or (2) economic divergence between China and Italy. Nevertheless, our research provides evidence in a developing country to support that policy-driven education expansion positively affects creativity.

Besides, this paper contributes to a strand of literature about the effect of increasing human capital. Previous articles have focused on total factor productivity (Che and Zhang, 2018), Skill-Biased Technology Adoption (Feng and Xia, 2018), and college premium (Li et al., 2017; Rong and Wu, 2020). The paper cuts in from the perspective of industrial enterprise innovation and observes the significance of this indicator. We use enterprise-level data to measure corporate innovation performance with more diversified measures, including patent applications and patent stock. More importantly, we find that human capital enhancement induced by the college enrollment expansion improves corporate innovation through diverse mechanisms, including R&D investment, patent stock, and agglomeration effect of graduates.”

References

Ma, X. College Expansion, Trade and Innovation: Evidence from China. MPRA Paper 109469 2020, University Library of Munich, Germany.

Che, Y.; Zhang, L. Human Capital, Technology Adoption and Firm Performance: Impacts of China's Higher Education Expansion in the Late 1990s. The Economic Journal 2018, Vol. 128 No. 614, pp. 2282-2320.

Andersson, R.; Quigley, J. M.; Wilhelmson, M. Urbanization, productivity, and innovation: Evidence from investment in higher education. Journal of Urban Economics 2009, Vol. 66 No. 1, pp. 2-15.

Cowan, R.; Zinovyeva, N. University effects on regional innovation. Research Policy 2013, Vol. 42 No. 3, pp. 788-800.

Feng S, Xia X. Endogenous skill-biased technology adoption: Evidence from China’s college enrollment expansion program. Human Capital and Economic Opportunity Working Group Working Papers 2018, 99.

Li, H.; Ma, Y.; Meng, L.; Qiao, X.; Shi, X. Skill complementarities and returns to higher education: Evidence from college enrollment expansion in China. China Economic Review 2017, Vol. 46, pp. 10-26.

Rong, Z.; Wu, B. Scientific personnel reallocation and firm innovation: Evidence from China’s college expansion. Journal of Comparative Economics 2020, Vol. 48 No. 3, pp. 709-728.

Reviewer 2 Report

Dear Authors,

It was a pleasure to read your study. Congratulations.

However, I think you may review the english and the lenght of the study. As it has a lot of information, it is not so easy to read it without being tired.

I suggest you to present your conceptual framework: readers will easier enter in the logic and maybe with this, the reading can be more efficient.

Please accept my dearest compliments and congratulations once again. Very interesting study and thematic.

Author Response

Dear reviewer:

Thank you for your affirmation and praise of our work. More importantly, we would like to thank you for your time reading our paper and providing valuable suggestions to help us improve the quality. We try to address these issues, and the following table shows our point-by-point response.

review the English and the length of the study.

We have checked the grammar of our paper, correct some typos/mistakes we made in the original manuscript, and try to express more understandable. Plus, the conceptual framework is helpful for us to illustrate our story.

present conceptual framework.

Thanks for your suggestion. To make the reading more efficient, we revise the “introduction” part with the end of the research objective. After the research objective, we complement a conceptual framework of the main idea of our study. The attached PDF shows the conceptual framework.

Author Response File: Author Response.pdf

Reviewer 3 Report

The article was interesting to read and it looks that the authors put a lot of effort in it.

However, it still has some weak points. First of all, the data for the research is old enough. Thus, naturaly there is the question. Does this data still represent real situation in present?

In addition, I found a lack of emphasis on added value to the field of study. What are the theoretical and managerial implication? Who and where these results might be practicaly used?

Author Response

Dear reviewer:

Reviewer’s advice

Authors’ response

First of all, the data for the research is old enough. Thus, naturaly there is the question. Does this data still represent real situation in present?

We use the Annual Survey of Industrial Enterprises for 2 reasons: (1) It contains enterprises with more than five million RMB sales, which are more representative than the listed company. (2) The time coverage is from 1998 to 2008, which happens to 5 years before and after the shock year 2003 when the college enrollment expansion brought the first batch of graduates to the labor market. There are a lot of papers using this data, including Tang and Zhang (2021) and Imbert et al. (2022). Even currently, the college enrollment expansion still brings about engineer dividends, which stimulates the transition to technology-intensive industries, digital transformation, and the development of strategic emerging industries. We also supplement the explanation of data in the data section:

“In the analysis process, the two micro-databases mainly used in this article are the Annual Survey of Industrial Enterprises maintained by the National Bureau of Statistics of China and the Chinese Patent Database released by the State Intellectual Property Office. The Annual Survey of Industrial Enterprises contains enterprises with more than five million RMB sales, which are more representative than the listed company. We match this data with patent application data through the enterprise name and legal person code. The research time span is from 1998 to 2008, five years before and after the shock year 2003, when the college enrollment expansion brought the first batch of graduates to the labor market. For the measurement of industry human capital intensity indicators, we refer to the data of Ciccone and Papaioannou (2009) and match the industry codes of Chinese enterprises and the industry norms they use, namely revision 2 of the United Nations International Standard Industry Classification (ISIC Rev2.0, 1968) covering 28 three-digit coding industries in the manufacturing industry. In the subsequent series of inspections, the control variables at the regional level were derived from the China City Statistical Yearbook, and we also apply the China Customs data released by the General Administration of Customs of China in the corresponding inspections.”

In addition, I found a lack of emphasis on added value to the field of study. What are the theoretical and managerial implication? Who and where these results might be practicaly used?

Thanks for your suggestions. The theoretical implication is that our paper contributes to three strands of papers: (1) heterogeneous impacts of the college enrollment expansion in China, (2) the impact of education expansion policy on innovation in various counties, and (3) the impact of increasing human capital effect. In each part, we analyze our findings deeply and compare them with other papers. We explain them in detail in the “discussion” section:

Besides, as for the practical implications, we stress that human capital is necessary for innovation, industry transition, and development of strategic emerging industries in the background of decreasing population dividends and aging populations. We expect our study to be useful for local government to pay attention to higher education and talent introduction plan. According to our results, we put forward three policy recommendations in the last paragraph of the “conclusion” section.

“Human capital is particularly important to China’s current economic stage when the demographic dividend is decreasing, the population structure is aging, while industries are transitioning to technology-intensive. As a milestone event in contemporary Chinese history, the college enrollment expansion not only increases the overall education level of residents but also supplies high-tech talents and expands the knowledge spillovers from colleges and universities to manufacturing firms and industries, and translates theoretical research into practice and products. Based on the analyses in this paper, we try to put forward three policy recommendations to help industries use human capital. First, the local government should take measures to dredge the channels of new graduates flowing to high-technical firms. More specifically, local administration could create an extensive communication platform among firms, colleges, and graduates, provide settlement convenience for graduates, and improve public utilities. Second, the local government could also increase the subsidy and tax deduction for R&D investment. This policy could encourage local firms to enhance R&D investment, which would speed up the transformation of human capital into innovation productivity. Finally, the quality of higher education should be improved by increasing the share of fiscal expenses, implementing intellectual property protection, and introducing advanced experts in key support areas, which can provide a think tank and a reserve army of talents for local firms.”

References

Tang, H., & Zhang, Y. Do multinationals transfer culture? Evidence on female employment in China. Journal of International Economics 2021, Vol. 133, pp. 103518.

Imbert, C., Seror, M., Zhang, Y., & Zylberberg, Y. Migrants and firms: Evidence from china. American Economic Review 2022, Vol. 112(6), pp. 1885-1914.

Ciccone, A.; Papaioannou, E. Human Capital, the Structure of Production, and Growth. The Review of Economics and Statistics 2009, Vol. 91 No. 1, pp. 66-82.

Ma, X. College Expansion, Trade and Innovation: Evidence from China. MPRA Paper 109469 2020, University Library of Munich, Germany.

Andersson, R.; Quigley, J. M.; Wilhelmson, M. Urbanization, productivity, and innovation: Evidence from investment in higher education. Journal of Urban Economics 2009, Vol. 66 No. 1, pp. 2-15.

Cowan, R.; Zinovyeva, N. University effects on regional innovation. Research Policy 2013, Vol. 42 No. 3, pp. 788-800.

Feng S, Xia X. Endogenous skill-biased technology adoption: Evidence from China’s college enrollment expansion program. Human Capital and Economic Opportunity Working Group Working Papers 2018, 99.

Rong, Z.; Wu, B. Scientific personnel reallocation and firm innovation: Evidence from China’s college expansion. Journal of Comparative Economics 2020, Vol. 48 No. 3, pp. 709-728.

Reviewer 4 Report

The article is interesting, it is innovative and it have high level technical statistics. However, I have some suggestions to improve this paper.

Abstract:

This section is a summary of the entire paper. Start with a short introduction. Then mention the research objective. Then write a summary of the methodology and a summary of the main results, and end with a summary of the practices of this study.

1. Introduction:

Recommending to place the research objective at the end of this section.

2. Literature:

Recommending to place the contribution of this article to the literature in the discussion section

3 Methodology:

Recommending to place the word methodology as the main title of this section

It's okay

4 Results:

Recommending placing the word results as the main title of this section

5 Discussion:

This discussion section should compare the results of this study with the results of previous studies, usually mentioned in the literature review section. Compare whether they are similar or different. How are they similar and how are they different? In addition, this section should mention and highlight the contribution of this study to the scientific literature. This section is the most important part of the entire paper. This is where what is new and innovative in this study should be highlighted, something that other authors have not yet found. Also, You should mention the particular contribution of this article. In this section the author's voice is fundamental.

6 Conclusions:

It is recommended to mention a little more what has been found in the results and analyze them further. In this section, the author should further analyze the results from different perspectives and give some recommendations based on what was found in this study.

Author Response

Please see the attachment.

Author Response File: Author Response.pdf

Round 2

Reviewer 2 Report

Dears Authors,

It was a pleasure to read your article.

Congratulations.