How do innovation factor allocation and institutional environment affect high-quality economic development? Evidence from China

Abstract

An in-depth understanding of the relationship between innovation factor allocation, the institutional environment, and high-quality economic development can help us better comprehend how better productivity promotes high-quality, regionally coordinate, and balanced economic development. Using panel data of 30 provincial-level regions in China from 2011 to 2019, we explore the effect of innovation factor allocation on high-quality economic development and the moderating effects of different institutional environments. First, we construct a comprehensive indicator system for innovation factor allocation and a new model to calculate the weights of various indicators of innovation factors. Second, we apply TOPSIS and grey correlation to measure the level of innovation factor allocation, and construct a modified gravity model to generate a directed weighted spatial association network of this allocation as a spatial weight matrix. Finally, we use the spatial Durbin model to empirically test the spatial effects of innovation factor allocation on high-quality economic development under different institutional environments. We find that: First, innovation factor allocation significantly positively affects the high-quality development of the local economy, while it has negative spatial spillover effects on neighboring areas. The impact of different types of institutional environments on high-quality economic development exhibits an inverted “U” shape. China's institutional environment has not crossed the critical threshold of this “U" shaped relationship. Thus, different types of institutional environments can still effectively strengthen the role of innovation factor allocation in promoting high-quality economic development. In particular, the strengthening effect of online government is the strongest and its negative impact is the weakest. Overall, this study is of great significance for optimizing innovation factor allocation in various regions and promoting high-quality economic development.