The government is provided with macro-control function in the market that can affect corporate resource allocation and economic efficiency through administrative or economic policies. A large number of studies have explored the impacts of government industrial policies, subsidies and other direct interventional economic measures on corporate total factor productivity. However, it lacks the understanding of government procurement, an economic tool that uses market procurement mechanisms to exert governance effects on companies. Few studies have noticed that the government can act as a customer to guide and support suppliers’ production and operation through market procurement, which helps to promote corporate innovation and improve production efficiency.
This paper verifies the role and internal mechanism of major government customers in promoting corporate total factor productivity based on Chinese listed companies’ voluntarily disclosed data of major government customers in 2008—2017. This paper finds that: Major government customers can significantly improve suppliers’ total factor productivity. The effects of major government customers on corporate total factor productivity are more prominent in customers with higher government governance efficiency and higher government level, and in companies with larger technological distances and higher product market competition. The mechanism analysis shows that major government customers promote total factor productivity by improving corporate innovation investment and resource allocation efficiency.
The contributions of this paper are as follows: First, from the perspective of government as a major corporate customer, this paper expands the research on government functions and confirms the effectiveness of market-oriented governance tools. Second, this paper supplements the empirical evidence of corporate total factor productivity incentives from the perspective of supply chain and verifies the positive effect of major government customers on corporate economic efficiency. Besides, it has noticed the discrepancy of governance effects under different government characteristics or corporate characteristics, which enriches studies on the relationship between government and enterprise. Third, this paper reveals the internal mechanism of major government customers on corporate total factor productivity and deepens the understanding of how government customers affect corporate behaviors. It has some implications for policy-makers and analysts. At first, listed companies should attach importance to the positive governance effect of government customers on total factor productivity. Then, governments should focus on the conditions and mechanisms for government customers to play a positive role and improve government governance efficiency. Last but not least, both governments and listed companies should understand the relationship between government and market correctly, and promote the government to play a better role in the market.