Alignment of Innovation and Entrepreneurship Policies with Firm Needs: Firm-Level Evidence on Innovation Capability and Business Performance Across Ownership Types, Firm Sizes, and Development Stages
Abstract
This study examines how closely the innovation and entrepreneurship policies offered by cities match firms’ needs and how this alignment relates to firms’ long-term innovation capability and business performance. Drawing on municipal policy documents and firm-level survey data, the study develops a framework covering seven policy dimensions: technology acquisition, research and development (R&D) support, commercialization, market expansion, access to talent, access to finance, and the business services environment. A policy supply–demand alignment model is then constructed and tested using the firm-level data.
The results indicate that innovation and entrepreneurship policies generally support firms’ long-term innovation capability and business performance, while the degree of alignment varies across firms. Alignment is higher among state-owned, large privately owned, and mature firms, and lower among small, micro, and early-stage firms. The findings point to four priorities for improving policy effectiveness: communicating available support more clearly, expanding advisory services, strengthening cooperation in technology transfer, and improving policy implementation and monitoring.
Keywords: Innovation policy, entrepreneurship policy, policy supply–demand alignment, innovation capability, business performance, firm heterogeneity.
Downloads
References
Griffith, D. A., Tamer Cavusgil, S., & Xu, S. (2008). Emerging themes in international business research. Journal of international business studies, 39(7), 1220-1235.
Stahl, G. K., & Tung, R. L. (2015). Towards a more balanced treatment of culture in international business studies: The need for positive cross-cultural scholarship. Journal of International Business Studies, 46(4), 391-414.
Pricopoaia, O., Busila, A.V., Cristache, N., Susanu, I., & Matis, C., 2024, Challenges for entrepreneurial innovation: Startups as tools for a better knowledge-based economy, International Entrepreneurship and Management Journal, 20(2), 969–1010.https://doi.org/10.1007/s11365-023-00905-4.
Kraus, S., McDowell, W., Ribeiro-Soriano, D.E., & Rodríguez-García, M., 2021, The role of innovation and knowledge for entrepreneurship and regional development, Entrepreneurship & Regional Development, 33(3–4), 175–184.https://doi.org/10.1080/08985626.2019.1650372.
Liu, W., Gu, J., Zhang, R., & Yang, Y., 2021, Supply and demand matching of financial support policies for private enterprises based on text measurement, Discrete Dynamics in Nature and Society, 2021, 1433600.https://doi.org/10.1155/2021/1433600.
Muzhipeng et al. Policy Supply–Demand Alignment, Organizational Efficiency, and Economic Performance
63
Meng, S., Gao, X., & Duan, L., 2022, Facing the COVID-19 pandemic and developing a sustainable entrepreneurial ecosystem: The theory and practice of innovation and entrepreneurship policies in China, International Journal of Environmental Research and Public Health, 19(14), 8797.https://doi.org/10.3390/ijerph19148797.
Bradley, S.W., Kim, P.H., Klein, P.G., McMullen, J.S., & Wennberg, K., 2021, Policy for innovative entrepreneurship: Institutions, interventions, and societal challenges, Strategic Entrepreneurship Journal, 15(2), 167–184.https://doi.org/10.1002/sej.1344.
Autio, E., Kenney, M., Mustar, P., Siegel, D., & Wright, M., 2014, Entrepreneurial innovation: The importance of context, Research Policy, 43(7), 1097–1108.https://doi.org/10.1016/j.respol.2014.01.015.
Boon, W., & Edler, J., 2018, Demand, challenges, and innovation: Making sense of new trends in innovation policy, Science and Public Policy, 45(4), 435–447. https://doi.org/10.1093/scipol/scy014.
Priem, R.L., Li, S., & Carr, J.C., 2012, Insights and new directions from demand-side approaches to technology innovation, entrepreneurship, and strategic management research, Journal of Management, 38(1), 346–374.https://doi.org/10.1177/0149206311429614.
Chi, M., Huang, R., & George, J.F., 2020, Collaboration in demand-driven supply chains: A governance and IT–business strategic alignment perspective, International Journal of Information Management, 52, 102062.https://doi.org/10.1016/j.ijinfomgt.2020.102062.
Exposito, A., & Sanchis-Llopis, J.A., 2018, Innovation and business performance for Spanish SMEs: New evidence from a multidimensional approach, International Small Business Journal, 36(8), 911–931.https://doi.org/10.1177/0266242618782596.
Pan, J., Lin, G., & Xiao, W., 2022, The heterogeneity of innovation, government R&D support and enterprise innovation performance, Research in International Business and Finance, 62, 101741.https://doi.org/10.1016/j.ribaf.2022.101741.
Audretsch, D.B., & Link, A.N., 2012, Entrepreneurship and innovation: Public policy frameworks, The Journal of Technology Transfer, 37(1), 1–17. https://doi.org/10.1007/s10961-010-9153-8.
Howlett, M., 2018, Matching policy tools and their targets: Beyond nudges and utility maximisation in policy design, Policy & Politics, 46(1), 101–124. https://doi.org/10.1332/030557318X15230058806607.
He, L., Dai, Y., & Guo, Y., 2025, Aligning behavioral assumptions underlying policy instruments: A principle for designing policy mixes targeting behavioral change, Public Administration, in press. https://doi.org/10.1111/padm.12945.
Azevedo, E.M., & Leshno, J.D., 2016, A supply and demand framework for two-sided matching markets, Journal of Political Economy, 124(5), 1235–1268. https://doi.org/10.1086/687543.
Wei, S., & Ye, C., 2024, How does government procurement promote enterprise innovation? On the synergy between demand-pull and supply-push of innovation policies, Frontiers of Education in China, 19(1), 1–24. https://doi.org/10.3868/s110-013-024-0006-7.
Candeias, J.C., & Sarkar, S., 2024, Entrepreneurial ecosystems policy formulation: A conceptual framework, Academy of Management Perspectives, 38(1), 77–105. https://doi.org/10.5465/amp.2021.0136.
Li, X., Zhang, G., & Qi, Y., 2024, Differentiated environmental regulations and enterprise innovation: The moderating role of government subsidies and executive political experience, Environment, Development and Sustainability, 26(2), 3639–3669. https://doi.org/10.1007/s10668-022-02847-9.
Neumark, D., & Young, T., 2021, Heterogeneous effects of state enterprise zone programs in the shorter run and longer run, Economic Development Quarterly, 35(2), 91–107. https://doi.org/10.1177/0891242420980530.
Srivastava, S., Sultan, A., & Chashti, N., 2017, Influence of innovation competence on firm-level competitiveness: An exploratory study, Asia Pacific Journal of Innovation and Entrepreneurship, 11(1), 63–75. https://doi.org/10.1108/APJIE-04-2017-002.
Nyemba, W.R., Mbohwa, C., & Carter, K.F., 2021, Incubation and technology parks: Recent trends, research and approaches, Bridging the Academia–Industry Divide: Innovation and Industrialisation Perspective Using Systems Thinking Research in Sub-Saharan Africa, Springer, 209–228. https://doi.org/10.1007/978-3-030-71078-3_13.
Ekolu, S.O., & Quainoo, H., 2019, Reliability of assessments in engineering education using Cronbach’s alpha, KR and split-half methods, Global Journal of Engineering Education, 21(1), 24–29.
Muzhipeng et al. Policy Supply–Demand Alignment, Organizational Efficiency, and Economic Performance
64
Koller, I., Levenson, M.R., & Glück, J., 2017, What do you think you are measuring? A mixed-methods procedure for assessing the content validity of test items and theory-based scaling, Frontiers in Psychology, 8, 126. https://doi.org/10.3389/fpsyg.2017.00126
Jellouli, S., Hassan, R., Ben Thabet, S., & Nefla, D., 2026, Matching supply with demand: A dual-index framework for financial inclusion, Journal of International Development, in press.
Green, S.B., & Yang, Y., 2015, Evaluation of dimensionality in the assessment of internal consistency reliability: Coefficient alpha and omega coefficients, Educational Measurement: Issues and Practice, 34(4), 14–20. https://doi.org/10.1111/emip.12059.
Forer, B., & Zumbo, B.D., 2011, Validation of multilevel constructs: Validation methods and empirical findings for the EDI, Social Indicators Research, 103(2), 231–265. https://doi.org/10.1007/s11205-010-9692-9.
Dahlstrand, A.L., & Stevenson, L., 2010, Innovative entrepreneurship policy: Linking innovation and entrepreneurship in a European context, Annals of Innovation & Entrepreneurship, 1(1), 5602. https://doi.org/10.3402/aie.v1i1.5602.
Xiao, T., Wang, H., & Chen, J., 2025, Evaluation of operational efficiency of technology transfer ecosystems from the perspective of supply and demand matching: An empirical study in China, The Journal of Technology Transfer, in press, 1–27. https://doi.org/10.1007/s10961-024-10012-7.
Plouffe, M., 2017, Firm heterogeneity and trade-policy stances: Evidence from a survey of Japanese producers, Business and Politics, 19(1), 1–40. https://doi.org/10.1017/bap.2016.10.
Rodriguez, S., 2025, Adaptive governance for a warming world: Resilience, fluid dynamics, and feedback mechanisms in climate change mitigation, Climate Policy, in press.
Pandey, N., de Coninck, H., & Sagar, A.D., 2022, Beyond technology transfer: Innovation cooperation to advance sustainable development in developing countries, Wiley Interdisciplinary Reviews: Energy and Environment, 11(2), e422. https://doi.org/10.1002/wene.422