How can regional integration promote corporate innovation? A peer effect study of R&D expenditure

Abstract

Literature on how regional integration within a country affects corporate innovation is limited. This study proposes a dynamic mechanism for integration of the Yangtze River Delta (YRD) to promote corporate innovation based on the peer effect among enterprises. It constructs a panel regression econometric model and a difference-in-differences (DID) model for empirical analysis using Chinese A-share listed manufacturing companies from 2007 to 2021. The study's results show that corporate innovation has a peer effect in the same industry and same region. The peer effect among enterprises in the same industry in the YRD is more significant than that in other regions, and YRD integration has a greater effect on the corporate innovation of cities with close economic ties in the YRD region. The study's findings indicate that regional integration and innovation-driven strategies adopted by China are highly synergistic. Therefore, accelerating the regional integration of each city cluster, establishing regional economic coordination organizations, and increasing the peer effect of firms in the same city are necessary to promote corporate innovation in China.