Abstract: As the market in China is dominated by the government’s power, the government’s regulation to ensure stable and healthy economic development always caught much attention. To deal with new economic situation, the central government issued a series of industry policies and enhanced its policy intervention on important industries and enterprises. Compared with the traditional policy method such as government subsidy and tax preference on which there are so much research, government procurement gradually aroused people’s interest. Base on the statistics released by the Ministry of Finance of the People’s Republic of China, direct procurement from the Chinese government reached RMB 3.21143 trillion in 2017 as a new record, which increased by more than ten times in the past ten years. So we can imagine the huge influence of government procurement on economy. In contrast, traditional government subsidy was reduced heavily, which indicated that the traditional way of flooding the economy with subsidy was gone. As a result, new approaches should be sought to support the companies effectively. Different from the traditional marketing channel, the government-based customer was guaranteed by the government credit and national finance. The stable and tremendous demand from the government-based customer would certainly promote the development of relevant industry and support the growth of the relevant companies. So the government procurement was irreplaceable for the development of economy, which ought to be the indispensable approach for the government to regulate the economy. Especially, in the government-dominated market in China, study on the government-based customer was an attractive issue with typical Chinese characteristics. Meanwhile it was an important vision to investigate the development and growth of Chinese companies.
Around the world, it is universally accepted that government-based customer could help to promote the growth of companies and the progress of technology. For example, enormous defense orders from the USA government helped the rise of the defense giants such as Boeing, Raytheon, Lockheed Martin etc. So, it was obvious that orders from government-based customer were indirect support to help the companies increase sales and enhance competitiveness compared with the traditional government subsidy. It not only helped the corporate improve the profitability, but also drove the corporate to innovate and progress, which alleviated the phenomenon that many companies just made a living from government subsidy. And the government procurement improved the effectiveness of government’s regulation.
It is worth noting that existing studies showed that, the traditional government subsidy was inefficient, and received mainly by state-owned companies, so that it was not optimistic that traditional government subsidy could improve all the companies in the industry, especially the private cooperates. As for the government-based customer’s influence on companies, it deserved more attention paid on whether the private companies with little political connection could benefit from government-based customer’s orders. Based on the issues above, this paper tried to investigate from three aspects. Firstly, as for the growth ability, this paper verified the government-based customer’s influence on the increase of company profitability and valuation in the future. Secondly, as for the possible channel that might be influenced, this paper investigated how the government-based customer influenced the company management from the aspect of innovation and R&D. Finally, this paper paid attention to difference between the influences that the government-based customer on different companies in different ownership.
From the perspective of financial performance and valuation, government-based customer might have influence on companies’ growth, so this paper put forward the following hypothesis:
Hypothesis 1a: The proportion of order amount from government-based customers in total sales has positive relationship with company growth of financial performance in future. Such relationship was especially outstanding for private companies.
Hypothesis 1b: The proportion of order amount from government-based customers in total sales has positive relationship with increase of company valuation in future. Such relationship was especially outstanding for private companies.
Meanwhile, as innovation and R&D were of great importance to company competitiveness and growth potential, it was probable that government-based customers might impact company innovation to influence its growth. So this paper put forward the following hypothesis:
Hypothesis 2: Government-based customers can stimulate the corporate to strengthen its R&D and innovation capacity, which finally promotes the company growth.
Based on the 2007-2015 customer data of listed firms, this paper studies the impact of government-based customer on companies’ growth in China. Empirical results shows that: The higher proportion of order amount from government-based customers in total sales, the stronger the profitability of the corporate in the future,  which result in the higher valuation for the corporate as its growth potential; The existence of government-based customer can effectively promote companies’ innovation so that to promote their growth, and the companies that received more government-based customer orders tended to have more growth potential and better financial quality; Such relationships were especially outstanding for private companies.
The contribution of this paper mainly lies in the following four aspects: (1) This paper helped deepened understanding about government support for companies, and it was the first time to investigate government support’s influence on companies’ growth, which was a meaningful practice. (2) The information of the Top Five Largest Customers in annual report can help us know the main customers of the companies, so that we could have knowledge of which companies influenced by government-based customers most. So we could investigate government-based customers’ influence on different types of companies, and summarize the different economic results caused by government-based customers. Hence, this paper was the first to use the customer information disclosed by companies to investigate government’s influence on companies. (3) This paper could provide reference and inspiration for government to improve its procurement policy and to support the development and growth of the companies more efficiently. Especially under the situation of the new normality, it had the great significance to make better use of government’s regulation, so that government’s support could be more precise, effective, efficient, and the phenomenon of zombie companies could be prevented. (4) It was an important link in innovation ecosystem for companies to build up good relationship with government-based customers, especially in the government-dominated market in China. Such was of great importance for the innovation and growth of the companies, so that this paper was a meaningful practice as it investigated the influence of government-based customer on the innovation and growth of the companies.

Key words: government-based customer, growth, innovation