Dynamics of the Subnational Regional Effect: Evidence from China

55 Pages Posted: 7 Sep 2017 Last revised: 13 Apr 2019

See all articles by Haibing Shu

Haibing Shu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management

V. Brian Viard

Cheung Kong Graduate School of Business

Date Written: April 12, 2019

Abstract

We investigate the dynamics of subnational regional effects (SREs) and how institutional access affects SREs over time using annual survey data of manufacturing firms in China from 1998 to 2007. SREs increase over time while China’s economy grows rapidly and globalizes and its institutions develop. This trend is explained by institutional divergence across regions over time. Institutional accessibility, consistent with its convergence over time, moderates the SRE growth. Based on proxies for institutions, we find evidence consistent with the institution-based theory as the cause of these dynamics. Our findings suggest that dynamics in institutions and institutional access are important in determining firm performance. Furthermore, local institutions and their importance can increase even as an economy develops due to institutional path-dependency.

Keywords: subnational regional effect; institution-based theory; institutional access; firm performance; dynamic profit components

JEL Classification: D02, O43, O53

Suggested Citation

Shu, Haibing and Viard, V. Brian, Dynamics of the Subnational Regional Effect: Evidence from China (April 12, 2019). Available at SSRN: https://ssrn.com/abstract=3032315 or http://dx.doi.org/10.2139/ssrn.3032315

Haibing Shu

Shanghai Jiao Tong University (SJTU) - Antai College of Economics and Management ( email )

No.1954 Huashan Road
Shanghai Jiao Tong University
Shanghai, Shanghai 200052
China

V. Brian Viard (Contact Author)

Cheung Kong Graduate School of Business ( email )

Oriental Plaza, Tower E3
One East Chang An Avenue
Beijing, 100738
China
86-10-8518-8858 (Phone)
86-10-8518-6800 (Fax)

HOME PAGE: http://english.ckgsb.edu.cn/faculty_content/brian-viard

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