Enhancing export product quality through innovative cities: A firm-level quasi-natural experiment in China

Abstract

China plays a significant role in the global product supply chain through its exports. To remain competitive, Chinese firms need to manufacture products cost-effectively. Revamping innovative cities can contribute to this goal, but empirical evidence in this area is limited. Therefore, this paper scrutinizes the innovative city pilot policy’s consequences on firms’ export performance and product quality. We employ the time-varying Difference in Difference (DID) model and harness a comprehensive firm-by-product level database to estimate the co-movement between the pilot intervention and the performance of the export product. Based on the findings, we unveil that a smart intervened city can significantly boost firms’ export product quality, which still holds after multiple robustness checks. Furthermore, innovative cities heighten the quality of the manufactured products when we consider firm-level (i.e., private, foreign, and ordinary trade enterprises), industry-level (i.e., low-polluting, capital-intensive, and technology-intensive industries), and regional (i.e., Middle, and Western regions) heterogeneities. In addition, the intervened smart city strategy impacts the efficacy of export product quality through policy and innovation-driven effects. Over and above, policymakers and experts should support state-of-the-art ideas while considering local conditions, providing guidance for decision-making in China’s innovative development strategy.