Institutional reform, path development and firm creation: evidence from China

Han Wang and Andrés Rodríguez-Pose

LSE Research Online Documents on Economics from London School of Economics and Political Science, LSE Library

Abstract: This paper examines whether and how government-led institutional changes can reshape regional industrial development trajectories. Using quarterly panel data from Chinese cities between 2019 and 2024, we assess the impact of reforms of the business environment on firm creation within both path creation and path dependent industries. Applying a staggered difference-in-differences approach combined with coarsened exact matching, our findings reveal that business environment reforms significantly increase firm creation in path creation industries, especially in high-tech sectors and cities with initially weaker business environments. Key mechanisms identified include enhancements in the market environment and government services, which are central to driving these effects.

Keywords: path creation; institutional change; business environment; path dependence; firm creation (search for similar items in EconPapers)
JEL-codes: O11 R11 R12 (search for similar items in EconPapers)
Pages: 20 pages
Date: 2025-10-27
New Economics Papers: this item is included in nep-bec, nep-cna, nep-geo, nep-sbm and nep-ure
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Published in Cambridge Journal of Regions, Economy and Society, 27, October, 2025. ISSN: 1752-1378

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Persistent link: https://EconPapers.repec.org/RePEc:ehl:lserod:129990

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