Does (un)-related variety promote regional innovation in China? Industry versus services sector

Abstract

PurposeAlthough recent studies have increased attention on the effects of related and unrelated variety on innovation, a Chinese test has until now been missing from the literature. This paper aims to investigate how related and unrelated variety affect regional innovation in Chinese provinces. In particular, emphasis was placed on differentiating the analysis for the industry and services sectors at a detailed sectoral level.Design/methodology/approachThis paper’s sample is composed of 30 provinces in China from 2003 to 2016. Feasible generalized least squares was used to estimate the effects of related and unrelated variety on regional innovation.FindingsThe results show that related variety in all sectors promotes regional innovation, whereas unrelated variety in all sectors does not play a role. In-depth analyses were performed by comparing the industry and services sectors. Only related variety in the industry sector and unrelated variety in the services sector promote regional innovation, whereas unrelated variety in the industry sector exerts a negative effect. After dividing the country into eastern, central and western regions, different findings appear in the sub-samples.Originality/valueThis study contributes to the literature on evolutionary economic geography and innovation by exploring how related and unrelated variety promote regional innovation in a developing country context (China). It also sheds light on the sectoral and regional differences in the influence of related and unrelated variety on regional innovation.