Does China’s innovation-driven policy affect enterprises’ import performance of intermediate goods?

Abstract

Based on a theoretical analysis of the impact of the innovative city pilot policy on manufacturing enterprises’ import behavior of intermediate goods, this paper performs a quasi-natural experiment via a multi-period differences-in-differences (DID) model with China’s innovative city pilot policy as the object. This study systematically evaluates the impact of the innovative city pilot policy on importing intermediate goods by local manufacturing enterprises. The empirical results show that implementing the innovative city pilot policy significantly increases the quantity, variety and quality of intermediate goods imported by local manufacturing enterprises. These conclusions remain valid even after a series of robustness tests. Impact mechanism tests indicate that obtaining government subsidies, alleviating financing constraints and reducing institutional transaction costs are three important channels through which the innovative city pilot policy promotes the import of intermediate goods by manufacturing enterprises. Furthermore, additional research reveals that the impact of the innovative city pilot policy on intermediate goods imports exhibits significant heterogeneity in enterprise size, age, ownership and trade mode. This study’s findings provide a new perspective for evaluating and exploring the performance of the innovative city policy and China’s foreign trade transformation and upgrading.