Place-based policy upgrading, business environment, and urban innovation: Evidence from high-tech zones in China

Abstract

High-tech zones (HTZs) are an important place-based policy of China, established for promoting urban innovation. Since 2007, the Chinese central government has successfully upgraded many provincial HTZs to national HTZs. Based on panel data from 251 cities from 2004 to 2016, we study the impact of China's HTZ upgrading policy on urban innovation and the mechanism underlying this effect. We find that the place-based upgrading policy significantly improves the innovation level of cities; this is facilitated by improvement to the urban business environment in terms of financing channels, infrastructure, and industrial agglomeration. Heterogeneity analysis reveals that the improvements resulting from HTZ upgrading are prominent in cities located in the eastern regions of China, in cities adjacent to provincial capitals, and cities with convenient transportation or a high degree of marketization.