Abstract
This paper contributes to distinguish different impact of institutional and cultural division on patterns of inter-regional linkages from the evidence of China. Institutional division hinders the inter-regional interactions mainly through the transaction costs mechanism, which leads to negative impact on both the horizontal and vertical linkages between regions. Cultural division hinders the industrial horizontal linkages between regions, but do not limit the formation of industrial vertical linkages. The cultural segmentation effect is mainly attributed to information mechanism. Regions with common culture have the comparative advantage of knowledge diffusion to form horizontal linkages. The expansion of industrial cooperation networks across regions needs to build up institutional trust rather than cultural proximity.
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