Can upgrading development zones enhance regional entrepreneurial activity? Evidence from Chinese enterprise registration data

Xin Liu, Zhao Xu, Kailai Zhang, Zhiyong Kang and Xinyue Xie

International Review of Economics & Finance, 2025, vol. 98, issue C

Abstract: As a crucial strategy for China's opening up and economic reform, development zones have undergone phases of initiation, boom and stable development since the establishment of Special Economic Zones (SEZs) in 1980, ultimately becoming engines for regional economic growth. In 2009, the Chinese government initiated the process of upgrading provincial-level development zones to national-level development zones, marking the beginning of a transformation in China's development zones from ‘quantitative change’ to ‘qualitative change’. What impact will the gradually implemented upgrading policy for development zones have on urban entrepreneurship? This study uses China's upgrading policy for development zones as a quasi-natural experiment and analyzes data from 2528 districts (or counties) from 2006 to 2019, employing the multi-period difference-in-differences (DID) method to examine the impact of upgrading development zones on entrepreneurial activity in both the local and surrounding areas. The study finds that the implementation of the upgrading policy for development zones significantly enhances the entrepreneurial activity in the local district (or county), but it has a certain suppressive effect on the entrepreneurial activity in the surrounding districts (or counties). After conducting various robustness tests, the conclusions remain valid. Further analysis reveals that the effects of the upgrading policy for development zones on entrepreneurial activity are notably influenced by the heterogeneity of urban characteristics and entrepreneurial enterprise characteristics. Mechanism tests indicate that business environment, preferential policies and agglomeration effects impact the entrepreneurial activity in the districts (or counties). The findings of this study expand the existing literature on the upgrading of development zones and entrepreneurship, providing relevant insights into how to further improve the development zone system and adjust its policy framework to promote innovative and entrepreneurial economic development.

Keywords: Development zones; Upgrading policy; Entrepreneurial activity; Economic development; Multi-period DID (search for similar items in EconPapers)
Date: 2025
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Persistent link: https://EconPapers.repec.org/RePEc:eee:reveco:v:98:y:2025:i:c:s1059056025000668

DOI: 10.1016/j.iref.2025.103903

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