Innovation capability of enterprises is one of the prime focuses of China as it fosters an
innovation-driven growth model in the period of ‘new normal’. This research examines the
effects of ownership and size on firm innovation capacity, using the World Bank China Enterprise
Survey (2012).
Unlike most existing studies, where these two important aspects of innovation were delved
separately, this paper analyses the effects in unison, based on survey data approach with different
dimensions added (city, industry fixed) and the interaction of ownership and size variables. Major
findings suggest that SOEs and domestic private enterprises are much alike in innovation
participation, but different in innovation diversification that leads to ownership- specific
innovative advantages. SOEs seem to be stronger in process innovation in general. Foreign
enterprises are more innovative in most of the innovation measurements. Size is positively
correlated to innovation. We also find that as the size of enterprise increases, ownership- specific
innovative advantage is subject to change. That implies that ownership and size should be
examined jointly rather than separately. The result also shows the effects of ownership and size
on innovations are uneven geographically and by industry.