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By utilizing systems methodology and thinking logic, this paper derives a general theorem to characterize when and how a market signals for additional competition from market players. Then, it establishes conditions for when government policies actually work in real life, where firms’ performances are effectively promoted no matter what offer the firms produce. Among others, the established conditions include improving managerial and resource efficiencies, promoting information and knowledge sharing, joining in organizational networks, forming manufacturing agglomerations, and localizing economic policies. By using the difference-in-difference method, a real-life case analysis with data from China is used to confirm the six formal propositions established systemically in this paper. In the conclusion section, recommendations for policy makers, such as government officers, are provided regarding when and how adopted policies will potentially produce anticipated results, while directions and unsettled questions are also posted for the forthcoming academic endeavors.

Market Competition and Economic Effects of Government Policies