Does regional innovation policy encourage firm indigenous innovation? Evidence from a quasi-natural experiment of the pilot project of innovative cities in China

Abstract

ABSTRACT Whether regional innovation policy can stimulate firms’ indigenous innovation is an essential issue of common concern for policymakers and scholars. Treating the pilot project of innovative cities as a quasi-natural experiment and using firm-level data from 2006 to 2013, this paper employs the difference-in-differences method to quantify the influence of innovative cities’ policy on enterprise indigenous innovation. We found that the innovative city pilot policy significantly stimulates firms’ indigenous innovation and this impact is heterogeneous at the industry and firm levels. In terms of industry heterogeneity, the innovative city pilot policy increases the number of patent filings in industries with high capital intensity; in terms of firm heterogeneity, the innovative city pilot policy stimulates the number of patent filings in both large and non-SOE enterprises. This policy mainly promotes high-quality indigenous innovation in firms. The test of the impact mechanism reveals that government subsidy and market competition are critical paths through which innovation city pilot policy influence enterprises’ indigenous innovation activities. The research in this paper reveals the micro effects of regional innovation policy and points out the direction for further promoting innovation city pilot work and formulating regional innovation policy.