The Smart City as a Field of Innovation: Effects of Public-Private Data Collaboration on the Innovation Performance of Small and Medium-Sized Enterprises in China

Paper by xiaohui jiang and Masaru Yarime: “The Chinese government has been playing an important role in stimulating innovation among Chinese enterprises. Small and medium-sized enterprises (SMEs), with their limited internal resources, particularly face a severe challenge in implementing innovation activities that depend upon data, funding sources, and talents. However, the rapidly developing smart city projects in China, where significant amounts of data are available from various sophisticated devices and generous funding opportunities, are providing rich opportunities for SMEs to explore data-driven innovation. Chinese Governments are trying to actively engage SMEs in the process of smart city construction. When cooperating with the government, the availability of and access to data involved in the government contracts and the ability required in the project help SMEs to train and improve their innovation ability.In this article, we intend to address how obtaining different types of government contracts (equipment supply, platform building, data analysis) can influence firms’ performance on innovation. Obtaining different types of government contracts are regarded as receiving different types of treatments. The hypothesis is that the data analysis type of contracts has a larger positive influence on improving the innovation ability compared to the platform building type, while the platform building type of contracts can have a larger influence compared to equipment supply. Focusing on the case of SMEs in China, this research aims to shed light on how the government and enterprises collaborate in smart city projects to facilitate innovation. Data on companies’ registered capital, industry, and software products from 1990– 2020 is compiled from the Tianyancha website. A panel dataset is established with the key characteristics of the SMEs, software productions, and their record on government contracts. Based on the company’s basic characteristics, we divided six pairs of treatment and control groups using propensity score matching (PSM) and then ran a validity test to confirm that the result of the division was reliable. Then based on the established control and treatment pairs, we run a difference-in-difference (DID) model, and the result supports our original hypothesis. The statistics shows mixed result, Hypothesis 1 which indicates that companies obtaining data analysis contracts will experience greater innovation improvements compared to those with platform-building contracts, is partially confirmed when using software copyright as an outcome variable. However, when using patent data as an indicator, the statistics is insignificant. Hypothesis 2, which posits that companies with platform-building contracts will show greater innovation improvements than those with equipment supply contracts, is not supported. Hypothesis 3 which suggests that companies receiving government contracts will have higher innovation outputs than those without, is confirmed. The case studies later have revealed the complex mechanisms behind the scenario…(More)”.