Innovation structure, which refers to how innovation decision-making authority is allocated between the parent and subsidiary companies, has a profound impact on corporate innovation performance. However, as a major participant in technological innovation, state-owned enterprises (SOEs) often overlook the significance of innovation structure optimization. The implementation of the Fair Competition Review System provides an ideal research setting to examine how changes in the external institutional environment drive the transformation of SOE innovation structures. From a theoretical perspective, this policy may affect SOE innovation structures in three ways: First, it strengthens market competition faced by SOEs and increases information costs under centralized innovation structures. Second, it enhances external supervision and promotes improvements in internal governance, reducing agency costs. Third, it reduces government subsidies and decreases the resources available for R&D.

On this basis, this paper takes SOEs from 2012 to 2022 as the research sample and examines the impact of the Fair Competition Review System on SOE innovation structures. The results show that the policy significantly promotes the adoption of decentralized innovation structures in SOEs. This effect is stronger when firms face lower financing constraints, have more geographically dispersed subsidiaries, have a lower proportion of executives with R&D backgrounds, and when executives face higher performance pressure. Mechanism testing shows that the policy affects innovation structures through two channels: increasing market competition intensity and improving the internal and external governance environments of SOEs. In addition, the decentralized innovation structures promoted by the policy help improve SOEs’ innovation quality.

The possible contributions of this paper are as follows: In terms of the research perspective, starting from the Fair Competition Review System, it explores the antecedents that affect SOE innovation structures; in terms of the research content, it examines whether the Fair Competition Review System can fundamentally reshape SOE innovation structures, expanding the research boundary of its impact on corporate innovation behavior; in terms of the research conclusion, it provides SOE managers with feasible guidance for optimizing innovation structures in a constantly changing external environment.