Focus on Innovation or Focus on Sales? The Influences of the Government of China’s Demand-Side Reform during COVID-19 and Their Sustainability Consequences in the Consumer Products Industry

Abstract

Affected by COVID-19, the Chinese government has implemented demand-side reform policies to stimulate consumption. In this context, should consumer goods companies focus on innovation (FOI) or focus on ales (FOS), and what impact does it have on sustainability? Based on the empirical data of listed companies in China’s A-share consumer goods industry, this paper uses a hierarchical regression model, a mediation effect test, moderation effect analysis, and a robustness test, and it finds that for consumer products industry enterprises under the background of demand-side reform: (1) FOI negatively affects enterprise sustainability, FOS positively affects enterprise sustainability, and tilting resources from FOI to FOS is conducive to improving sustainability; (2) the direct effect of FOI on sustainability is not significant, and its negative effect on sustainability is exerted exclusively indirectly through FOS; and (3) firm value can positively moderate the relationship between FOS and sustainability, but its moderating effect on the relationship between FOI and sustainability is insignificant. These conclusions are of positive significance for the study of corporate innovation, sales behavior, and sustainability performance under demand-side reform. More broadly, this paper enriches the study of corporate sustainability in the context of an unfavorable macro environment and short-term and large policy stimulus in the market.