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Land supply constraints and firm innovation: Evidence from China’s minimum industrial land price policy

Author

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  • Xie, Dongshui
  • Han, Yongnan
  • Fahad, Shah

Abstract

Land is more than just a factor of production; it shapes the trajectory of firm innovation, but few studies have explored the influence of land supply constraints on innovation. This study examines how land supply constraints impact firm-level innovation by leveraging China’s 2007 minimum industrial land price (MILP) policy as a quasi-experiment. Using a difference-in-differences approach, we find that restricting industrial land supply through the MILP policy significantly stimulates firm innovation, particularly in regions that experienced greater policy shocks. This effect is more pronounced in the central and western regions, in state-owned enterprises and in areas with lower economic agglomeration. Mechanism analysis reveals that the MILP policy has significantly enhanced local government land allocation efficiency, screened high-innovation-capacity firms for entry and improved the institutional environment of the land market, thereby enhancing regional firm innovation levels. Our findings can assist policy-makers in improving the market-oriented allocation of land factors and promoting firm innovation.

Suggested Citation

  • Xie, Dongshui & Han, Yongnan & Fahad, Shah, 2026. "Land supply constraints and firm innovation: Evidence from China’s minimum industrial land price policy," Economic Analysis and Policy, Elsevier, vol. 91(C), pages 711-729.
    • Handle: RePEc:eee:ecanpo:v:91:y:2026:i:c:p:711-729
    DOI: 10.1016/j.eap.2026.03.034
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    Keywords

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    JEL classification:

    • R52 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Land Use and Other Regulations
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • L53 - Industrial Organization - - Regulation and Industrial Policy - - - Enterprise Policy

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