Domestic Market Integration and Subsidies Provided by Local Government to Zombie Firms: Evidence from China’s City-Level Data
Round 1
Reviewer 1 Report
Comments and Suggestions for AuthorsUpon analyzing the provided article, several potential areas for improvement can be identified:
​Originality: The novelty of the study may be subject to debate. Although the authors claim that their work is among the first to combine the examination of domestic market integration (DMI) with the issue of zombie enterprises, the underlying concepts of their argumentation, such as local protectionism and inefficient resource allocation, have long been present in economic literature. The innovation may primarily lie in the specific Chinese context and the applied methodology.​
Research Design: Although control variables are listed and justified based on existing literature, providing a brief additional explanation for selecting these specific variables over other potential ones could enhance the model's transparency.​
Results Section: While the regression results are clearly presented in tables, the accompanying text could place greater emphasis on the most statistically significant findings, elucidating their implications in a more accessible manner. Currently, the text describes the results but could benefit from deeper interpretation and direct references to the initial hypotheses.​
Conclusions: The policy recommendations section is concrete. Nonetheless, a brief additional discussion of potential challenges associated with implementing these recommendations or a more detailed consideration of their long-term consequences for China's sustainable economic development could be considered.​
The article offers a robust analysis; however, including a dedicated paragraph discussing potential study limitations—such as data availability, the specificity of the sample of Chinese cities from 2008 to 2016, or the methodology used to measure market segmentation and the status of zombie firms—could increase credibility and demonstrate the authors' awareness of the scope of their conclusions.​
In summary, the article is of high quality, but minor enhancements in presenting results, deepening certain theoretical explanations, acknowledging potential limitations, and providing a more pronounced visualization could further improve its clarity, persuasiveness, and impact.
Author Response
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Author Response File: 
Author Response.pdf
Reviewer 2 Report
Comments and Suggestions for AuthorsThe article's topic is relevant to academic research and aligns well with the journal Sustainability's aims and scope.
Overall, the article follows a coherent structure and ensures clarity and accessibility for the reader.
The abstract identifies a relevant and timely issue (domestic market integration in emerging economies). It offers a novel empirical perspective by linking it to the impact of subsidies for zombie firms, supported by a rich dataset covering 297 Chinese cities. However, the claim that market integration has become a “critical indicator” of sustainable economic development may be overstated, as integration is better understood as a contributing factor rather than a formal sustainability metric.
The study focuses on the period 2008–2016, which, although relevant for capturing the aftermath of the global financial crisis and early domestic policy shifts, raises questions regarding the timeliness and applicability of the findings in the current context. Given that we are in 2025, a more recent dataset would have strengthened the relevance of the conclusions, particularly in light of significant developments and ongoing shifts in global supply chains.
The authors should provide a clear definition of zombie firms in the context of the current study, and Figure 1 should be accompanied by a credible and properly cited data source.
While the hypothesis is explicitly formulated and policy-relevant, it would benefit from a more precise definition of zombie firms and a nuanced consideration of potential heterogeneity in the effects of subsidies. Additionally, the causal pathway between subsidies and regional market segmentation may be more complex than currently assumed.
The dataset covers the period 2008–2016, which is considerably distant from current economic conditions in 2025. Updating the database with more recent data would significantly enhance the study’s relevance and applicability.
The conclusions and policy recommendations are logically structured and cover multiple policy dimensions relevant to domestic market integration. However, given the time lag in the data (2008–2016), the relevance of some policy suggestions may be limited unless they are updated or revalidated in light of more recent economic developments.
Author Response
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Author Response File: Author Response.pdf
Reviewer 3 Report
Comments and Suggestions for AuthorsI have carefully read the paper and I particularly liked it for two reasons: the topic is very challenging and the paper is written in a very accurate manner, the reader being able to follow the scientific discourse.
Starting from the abstract, the authors indicated very well the purpose, the used methods, sample and results. Moreover, the theoretical part is very well contextualized, the authors presenting in a clear manner the previous studies regarding the relationship between zombie firms, local governments and the allocated subsidies. Based on this theoretical background, the authors also developed a research hypothesis.
The methodology is appropriate for this research and it is very well presented. It clearly underlines the used methods and model, the variables and the data sources. Yet, even though the results are clearly presented, the authors should detail them more by relating them to the findings of previous studies.
The conclusions are consistent with the evidence and arguments presented in the results part
and they address the research hypothesis. I particularly liked the fact that the authors made some policy recommendations based on their findings.
The cited references are appropriate for the investigated subject.
Author Response
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Author Response File: Author Response.pdf
Reviewer 4 Report
Comments and Suggestions for AuthorsDear Authors
- In the current version of the manuscript, the contribution of the study is mentioned throughout the text but lacks a concise and structured presentation. It is recommended to:
- add a dedicated paragraph at the end of the Introduction, titled for instance “Contributions of the Study”, clearly outlining the novelty of the research in a bullet-point or numbered format (e.g., “This study contributes to the literature in three ways...”);
- reiterate the key contributions in the Conclusion section.
- While the literature review includes many relevant sources, it would benefit from a more analytical and comparative structure. Specifically, the authors are encouraged to:
- include a critical comparison with closely related studies (e.g., McGowan et al., 2018; Young et al., 2021; Barwick et al., 2021);
- clarify how the present study differs in terms of methodology, empirical strategy, or conceptual framework;
- consider thematically organizing the review (e.g., subsidies and firm performance, zombie firm dynamics, institutional factors of DMI).
- Section 2 (“Theoretical Analysis and Research Hypotheses”) provides rich theoretical content, but it would benefit from stronger conceptual clarity and visual support. It is recommended to:
- incorporate a conceptual framework diagram (e.g., a block or flow chart) to illustrate the causal mechanisms linking:
subsidies → survival of zombie firms → institutional trade costs / innovation crowding-out / resource misallocation → market segmentation;
- briefly explain each mechanism and indicate where it is empirically tested in the paper.
- The language is clear and comprehensible.
Thank you.
Comments for author File: Comments.pdf
Author Response
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Author Response File: Author Response.pdf
Round 2
Reviewer 2 Report
Comments and Suggestions for AuthorsThe authors have addressed the necessary revisions, and the manuscript is now suitable for publication.
