（Institute of Quality Development Strategy，Wuhan University;Coordination Innovation Center of Macro Quality Management in Hubei Province）
Abstract: Zombie firms could distort the competition, destroy the innovative destruction, and induce systematic risks of the economy. Exploring the mechanism of how zombie firms come into being from the micro prospective would contribute to clearing them away, thus promoting the economic growth quality of China in new normal. This paper conducted an empirical study on the mystery of zombies from the microscopic perspective by employing China Employer Employee Survey (CEES) dataset in 2015. Based on the result of Propensity Score Match (PSM), it is found that zombie firms are significantly lower than non-zombie firms in product quality capability, technological innovation capability and entrepreneurships. The Average Treatment Effects (ATE) are between -8.3%~-7.2%, -16.3%~-11.2% and -26.9%~-20.6% respectively, complying with the requirement of causal effect, which manifests that the inner factors are the inevitable causes of zombie firms, apart from fiscal subsidy and financial rescue. Therefore, it is suggested that in order to eliminate zombie firms, great attention should be paid to enterprises’ inner factors. Concretely speaking, the government should help to create an equal market to promote the inner motivation of quality innovation, to enhance input in technological innovation to accelerate the product renewing, and to nurture productive and innovative entrepreneurship by market mechanism.
Key Words: Zombie Firms; Product Quality; Technological Innovation; Entrepreneurship