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Place-based techno-industrial policy and innovation: Government responses to the information revolution in China

Changqing Liu and Lei Li

China Economic Review, 2021, vol. 66, issue C

Abstract: This paper examines the impact of pilot zones for integrating informatization and industrialization (PZIIs), a novel place-based techno-industrial policy for innovation. Combining quality-adjusted invention patent data, we find that PZIIs have a significant and positive impact on urban innovation. Direct or indirect government support plays a vital role in mediating policy effects. The higher the government's fiscal self-sufficiency rate, or the more economic resources it has, the stronger the policy effects. Moreover, policy effects are amplified in pilot zones that incorporate PZII performance into local government performance assessments and span multiple prefectural administrative units. Indirect government support is reflected in the promotion of market-oriented reforms. Policy effects are greater in pilot zones with a higher degree of marketization. Further, based on firm data, we show that PZIIs effectively guide firms to increase R&D investment, indicating that PZIIs create innovation incentives. Our paper facilitates understanding the role of government in accelerating the penetration of new technology into industrial upgrades.

Keywords: Place-based policy; Information technology; Innovation; Difference-in-differences (search for similar items in EconPapers)
JEL-codes: L52 L86 O31 R58 (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1016/j.chieco.2021.101600

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China Economic Review is currently edited by B.M. Fleisher, K. X. D. Huang, M.E. Lovely, Y. Wen, X. Zhang and X. Zhu

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