Services trade innovation and supply chain efficiency: evidence from China’s services trade innovation pilot programme
Description
Developing countries often face high inventories and weak operating efficiency because producer-service supply is insufficient and services markets remain subject to institutional barriers. This study examines whether institutional opening in services trade can relax these constraints and improve firm-level supply chain efficiency. Using China's pilot programme for the innovative development of services trade as a quasi-natural experiment and listed-firm data, we identify the mechanisms through which the policy affects inventory decisions. The results show that the pilot programme significantly reduces non-finished-goods inventories and improves supply chain efficiency. The finding remains robust after propensity score matching, controls for other contemporaneous policy shocks, and instrumental-variable estimation. Mechanism tests indicate that the policy operates through three connected channels: shortening upstream procurement lead time, promoting midstream digital transformation, and diversifying downstream customers. Heterogeneity analysis further shows that the effect is stronger for firms with greater growth advantages and higher productivity. This study provides micro-level causal evidence on how institutional innovation in services trade reduces precautionary inventories and strengthens supply chain efficiency.