Innovation target responsibility system, capital allocation and regional innovation capacity: Evidence from China✰

Lingling Xu, Huijie Zhong, Xiaodi Huang and Xiaoyu Zhu

Finance Research Letters, 2023, vol. 58, issue PD

Abstract: Using the pilot construction of innovative provinces in China as an exogenous shock, our difference-in-differences estimate shows that the target responsibility system has a significant and positive impact on regional innovation capacity, which is robust to a variety of robustness checks. Furthermore, this active innovation role is stronger in cities with higher marketization level, higher initial innovation capacity and more bank branches. Our mechanism tests show that the credit supply of local banks and fiscal expenditures on science and technology increase after this reform. Taken together, our findings argue that China's patent boom can be partly attributed to the increased emphasis of governments on innovation.

Keywords: Innovation target responsibility system; Regional innovation capacity; Bank credit allocation; Fiscal incentives for R&D; China (search for similar items in EconPapers)
JEL-codes: O31 O38 R58 (search for similar items in EconPapers)
Date: 2023
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:finlet:v:58:y:2023:i:pd:s1544612323010346

DOI: 10.1016/j.frl.2023.104662

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