Government innovation procurement and corporate dual competitive strategy: differentiation or cost leadership?

As a critical link between policy orientation and market demand, government innovation procurement has increasingly demonstrated its role in shaping firms’ competitive strategies. Based on over two million government procurement contract records and textual data from corporate annual reports, this study constructs indicators for government innovation procurement and corporate competitive strategies using machine learning and text analysis methods. We empirically examine the impact of government innovation procurement on firms’ competitive strategies. The results show that government innovation procurement facilitates the implementation of firms’ competitive strategies. Mechanism analysis reveals that such procurement enhances firms’ resource acquisition capabilities to promote differentiation strategies; it also drives digital transformation to support cost leadership strategies. Heterogeneity analysis further indicates that the impact of government innovation procurement on competitive strategies varies according to firm characteristics, industry attributes, and types of procurement. This study unveils the interactive logic between government innovation procurement and corporate competitive strategy, offering valuable insights for emerging economies seeking to improve their public procurement systems.