Abstract
Based on data from 2007 to 2011 across 29 provinces in China, this paper employs a panel-based econometric model to investigate the impact of clusters (of firms and educational institutions) and R & D investment in driving productivity in China’s software industry. In respect of clusters, our results show that a one percent increase in the density of firm clusters leads to a 0.10 percent increase in productivity; for clusters of educational institutions, a significantly positive impact on productivity in coastal regions has been identified. In terms of R & D investment, a one percent increase in R & D expenditure per R & D worker leads to a 0.22 percent increase in productivity, although the effect is significantly reduced in coastal region. For policymakers, the results of this study shed light on the effectiveness of different levers in narrowing regional productivity gaps. It can also help business leaders make better decisions regarding their innovation activities.
Highlights
Debate has raged in the economic geography and regional policy literature around the role of industry clusters in advancing key economic goals related to innovation, productivity, employment and GDP growth
We focus on productivity because it is an important variable in advancing GDP growth and in raising living standards; it is critical to addressing significant regional economic disparities in China, between coastal and inland regions
We found that four out of nine independent variables were statistically significant in explaining the variation in productivity
Summary
Debate has raged in the economic geography and regional policy literature around the role of industry clusters in advancing key economic goals related to innovation, productivity, employment and GDP growth. We examine the productivity effects of clusters in a specific industry vital to China’s future economic growth: the software industry. This is a key sector underpinning the hard-won economic success the country currently enjoys, enabling businesses to innovate more readily and increase their competitiveness in world markets. Given its central role in powering China’s future, the industry is growing rapidly It reached 2.5 trillion RMB last year, with year-on-year growth of 28.5%, according to the Ministry of Industry and Information Technology of China [1]. Our findings shed light on the key levers available to policy makers and business strategists looking to stimulate productivity growth
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