Judicial fairness perception and corporate innovation: Evidence from entrepreneur survey in China

Abstract

This study examines the impact of judicial fairness perception on corporate innovation among small and medium-sized enterprises (SMEs) in China, utilizing data from the 2018 Enterprise Survey for Innovation and Entrepreneurship (ESIEC). Our findings reveal a robust positive relationship between higher levels of judicial fairness perception and increased innovation activities within SMEs. Notably, this effect is more pronounced in enterprises led by less-educated entrepreneurs, located in regions with weaker intellectual property protection, or with lower reliance on government support. We identify improved contract enforcement, enhanced policy effectiveness, and increased innovation investment as key mechanisms driving this relationship. These results suggest that judicial reforms to increase fairness can significantly foster innovation, particularly in resource-constrained SMEs in emerging economies.