Domestic substitution of key core technologies has become a fundamental goal in “pursuing both development and security within industrial policies”. It is also essential for fostering a new development paradigm centered on domestic circulation, where domestic and international circulations reinforce each other. When enterprises pursue the substitution, they must reform areas such as innovation and investment, driving the shift from low-level domestic supply to high-level global supply. Thus, domestic substitution of key core technologies represents an upgrade in business operations. During this process, the capacity of enterprises to absorb employment will inevitably be affected. However, there is little discussion on this issue.

Using the data of A-share listed companies from 2010 to 2022, this paper applies a multi-time DID model to investigate the impact and mechanisms of domestic substitution of key core technologies on the scale of labor employment in enterprises based on the task model theory. The study shows that the substitution significantly increases the number of employees. The key mechanisms involve both creative and destructive effects, with the former dominating. The creative effect manifests in production scale expansion and operating costreduction; the destructive effect is reflected in improved technical efficiency and increased business risks. Heterogeneity analysis shows that this promoting effect is more pronounced for enterprises with higher R&D investment, lower risk perception, and greater demand opportunities, and those in policy-supported industries. Additionally, the substitution mainly increases the employment in production, R&D, and technical positions.

The contributions of this paper are as follows: First, from the perspective of employment scale, it reveals the microeconomic consequences of domestic substitution of key core technologies. Second, it explores how the substitution affects employment via creative and destructive effects, offering a reliable path to understanding their intrinsic connection and expanding the application of the task model theory in employment research. Third, it identifies the heterogeneity in substitution capability, motivation, and opportunity regarding the impact of the substitution on labor employment, expanding the boundary factors affecting the employment effect of domestic substitution. Fourth, it has important policy significance for further promoting enterprises to implement domestic substitution of key core technologies, enhancing employment absorption and addressing employment-related livelihood issues.