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Business & Economics

EFFECTS OF PRIVATE ENTERPRISE PARTICIPATION IN MILITARY INDUSTRIAL DEVELOPMENT ON ENTERPRISE PERFORMANCES: EVIDENCES FROM CHINA
Renfang Liu, Xianping Zhou, Guyue Xiang, Jingyu Yang

ABSTRACT. Military-civilian integration is a national strategy of China to realize the synchronous development of economic and national defence constructions. The government of China is devoted to promoting the participation of private enterprises in military industrial development. However, there is no explicit answer to whether the participation of private enterprises in military industrial development is conducive to improve enterprise performance. To explore the effect of private enterprise participation in military industrial development on enterprise performance, the military-civilian integration degree was measured by types and the number of access certificates to the military industry, the data of Chinese-listed A-share non-financial private enterprises from 2001 to 2017 and the multi-point difference-in-difference method were applied to analyse revenues and fluctuations before and after gaining the access certificate to the military industry. Results show that private enterprise participation in military industrial development slightly influences enterprise performance but can decrease the fluctuation of enterprise performance. The fluctuation of enterprise performance can be decreased if the military-civilian integration degree is high. The military-civilian integration can inhibit the fluctuation of enterprise performance more in regions with high compared with low marketization degree. The military-civilian integration is more beneficial to decrease performance fluctuation of large-sized private enterprises than small and medium-sized enterprises. The conclusions provide not only practical references for policy formulators to formulate differentiation policies according to the economic development of regions but also decision-making references for private enterprises who attempt to participate in military industrial development.

KEYWORDS:  military-civilian integration, military industrial development, private enterprise, difference-in-difference.

JEL classification:  D04, M14, M21.