Do Place-Based Policies Promote Local Innovation and Entrepreneurial Finance?

Abstract

This paper explores how a prominent place-based policy in China, the national high-tech zones, affects local innovation and entrepreneurial activities. Relying on plausible exogenous variation in place-based policies caused by staggered establishments of national high-tech zones and using a difference-in-differences approach, we find the establishment of national high-tech zones has a positive effect on local innovation output and the entrepreneurial activities. A number of additional tests suggest that the effects appear causal. Access to financing resources, reductions in administrative burdens, and talent cultivation are three plausible underlying channels that allow the establishment of national high-tech zones positively affect local innovation and entrepreneurship. Our paper sheds new light on the effects of China’s national high-tech zones and provides new evidence to the debate about the real effect of place-based policies.

Keywords: Entrepreneurial finance, Innovation, National high-tech zones, Access to finance, Administrative burdens, Talent cultivation

JEL Classification: G30, L26, O31, R50