From the "Iron Rice Bowl" to "Innocation Collapse":How Public Sector Attractiveness Reshapes Corporate Human Capital

Using prefecture-level city civil service recruitment data and panel data on Shanghai- and Shenzhen-listed A-share firms in China from 2010 to 2024, this paper systematically examines the impact of public sector entry competition (PSEC) on corporate innovation. The results show that intensifying PSEC significantly increases innovation input at the city level while simultaneously suppressing firm-level research and development (R&D) investment and innovation output, producing a structural divergence characterised by “macro-level expansion and micro-level contraction.” Mechanism analysis indicates that this effect operates primarily through the misallocation of human capital (HC). Specifically, the increased attractiveness of the public sector crowds out the supply of key corporate talent through both a talent-siphoning effect and an exam-preparation-and-waiting effect. This dynamic is particularly detrimental to technical personnel with bachelor’s and master’s degrees, thereby weakening firms’ innovation capacity. At the same time, a widening internal wage gap and rising labour intensity further undermine innovation incentives and efficiency. Heterogeneity analysis further shows that this effect is more pronounced among non-state-owned enterprises (non-SOEs), firms facing tighter financing constraints, and those located in western China. From the perspective of intersectoral talent competition, this paper elucidates the mechanism through which the institutional environment shapes corporate innovation via the reallocation of HC. It offers new empirical evidence and policy insights for understanding the misallocation of innovation resources against the backdrop of the growing “civil service examination craze.”