Distance matters: the limits of government in upgrading export enterprises—evidence from China

In this paper, using China's firm-level data (2000–2013), we provide empirical evidence of the government's limited role in enterprises' upgrading with the fixed effects model. We find that the distance between the government and enterprises in China generally shows an increasing trend from 2000 to 2013, and this increase has a significant negative impact on export upgrading. Mechanism analysis shows that the increase in government–enterprise distance, indicating that the rise of information search cost, innovation policy decay, and the decline of public service accessibility are the reasons for the negative impact on export upgrading. Heterogeneity analysis shows that the negative impact of the distance between the government and enterprises on export upgrading is more obvious in private enterprises and enterprises in labor-intensive industries. Our research adds evidence to a growing literature emphasizing the government's limited role in promoting export enterprises' upgrading.