China’s manufacturing sector mainly relies on incremental innovation and lacks radical innovation based on fundamental research. As the driving force for high-quality development, creative destruction can not only replace old technologies with new ones, but also open up a path for profound changes in production processes. Therefore, scientifically assessing the impact of creative destruction on enterprise productivity holds significant practical importance for guiding high-quality development through technological innovation.

Based on the perspectives of innovation investment choice and cost constraints, this paper examines the impact and mechanism of creative destruction on enterprise productivity. It is found that creative destruction presents an inverted U-shaped relationship to enterprise productivity. In terms of mechanism, creative destruction plays an enabling role in innovation investment, leading incumbent enterprises to choose product innovation, thereby promoting the growth of TFP, and the enabling effect is more effective in incumbent enterprises with strong innovation capability. Through the adjustment of the cost constraint mechanism, the inverted U-shaped curve becomes steeper. Further analysis shows that the impact of creative destruction on the TFP of other incumbents presents an inverted U-shaped relationship, while the impact of creative destruction on the TFP of new entrants presents a U-shaped relationship.

The contributions of this paper include that: (1) It conducts a comprehensive analysis of the dual nature of creative destruction and finds that the relationship between creative destruction and productivity is not a simple linear one, but rather an inverted U-shaped nonlinear relationship. (2) It models how enterprises choose innovation types based on expected rents, deducing that new enterprises enter the market through creative destruction, while enterprises subject to creative destruction may exit the market, leading to the reallocation of production factors across enterprises. (3) It analyzes the internal reasons that constrain the effect of creative destruction from the perspectives of innovation investment choice and cost constraints, examining the moderating effect of enterprise innovation capability on creative destruction enabling innovation investment.