Labour protection, social security contributions and corporate innovation: evidence from China

Abstract

PurposeAs China shifts from a “human capital demographic dividend” to a “demographic dividend” as a source of economic growth, this paper examines the influence of social security system improvement on enterprises efforts to attract talent and enhance innovation ability.Design/methodology/approachThis study uses a sample of Chinese listed firms from 2008 to 2019 to analyse the influences of social security contributions on enterprise innovation, and the mediating effect of human capital accumulation. The OLS, DID test, placebo test, 2SLS are used to test the research questions.FindingsThe authors find a significant positive correlation between social security contributions and enterprise innovation because social security contributions improve the accumulation of human capital, helping enterprises to attract talent, which in turn has a positive impact on corporate innovation. The positive correlation between social security contributions and enterprise innovation is more significant in private enterprises, STAR Market and GEM listed companies and labour-intensive enterprises.Practical implicationsThese findings provide a theoretical basis for the formulation of relevant policies and the current reform of social security collection in China. The findings also have practical significance for the sustainable development of China's economy given its ageing population.Originality/valueThis study provides a new perspective, that is, from the perspective of human capital accumulation, to discuss the impact of social security contributions on enterprise innovation, and enriches the relevant literature on the economic consequences of social security contributions and the influencing factors of corporate innovation.