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Openness, Absorptive Capacity, and Regional Innovation in China

Author

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  • Chih-Hai Yang

    (Department of Economics, National Central University, 300 Jhongda Road, Jhongli City 320, Taiwan)

  • Hui-Lin Lin

    (Department of Economics, National Taiwan University, 21 Hsu-Chow Road, Taipei 10055, Taiwan)

Abstract

This paper systematically investigates the impacts of openness on regional innovation in China, especially the role of absorptive capacity in mediating the spillover effect brought about by openness. Based on provincial-level data over the period 1997–2007 and adopting patents as indicator of innovation, the empirical results show that the estimated patents–R&D elasticity is lower than that for OECD countries, while there is a significant R&D spillover effect across regions in China. Technology import overall has no significant influence on fostering innovations, but it is significantly positive for coastal regions. Openness to trade, in terms of FDI and high-tech product exports, is witnessed to exhibit a significantly positive impact on promoting regional innovation. Crucially, the effects of technology imports and FDI on innovations vary significantly between coastal and non-coastal regions. Using human capital as a proxy for absorptive capacity, we find it helps in learning external sources of knowledge and then contributes to innovations. Moreover, absorptive capacity is expected to play an important role in mediating the spillover effect brought about by openness to trade.

Suggested Citation

  • Chih-Hai Yang & Hui-Lin Lin, 2012. "Openness, Absorptive Capacity, and Regional Innovation in China," Environment and Planning A, , vol. 44(2), pages 333-355, February.
    • Handle: RePEc:sae:envira:v:44:y:2012:i:2:p:333-355
    DOI: 10.1068/a44182
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    2. Li, Jian & Strange, Roger & Ning, Lutao & Sutherland, Dylan, 2016. "Outward foreign direct investment and domestic innovation performance: Evidence from China," International Business Review, Elsevier, vol. 25(5), pages 1010-1019.
    3. Jarle Aarstad & Stig-Erik Jakobsen, 2020. "Norwegian Firms’ Green and New Industry Strategies: A Dual Challenge," Sustainability, MDPI, vol. 12(1), pages 1-14, January.
    4. Gao, Xue & Rai, Varun, 2019. "Local demand-pull policy and energy innovation: Evidence from the solar photovoltaic market in China," Energy Policy, Elsevier, vol. 128(C), pages 364-376.
    5. Wang, Yuandi & Sutherland, Dylan & Ning, Lutao & Pan, Xin, 2015. "The evolving nature of China's regional innovation systems: Insights from an exploration–exploitation approach," Technological Forecasting and Social Change, Elsevier, vol. 100(C), pages 140-152.

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