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Do China's special economic zones increase incentives to invest in R&D?

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  • Hussinger, Katrin
  • Palladini, Lorenzo

Abstract

China's special economic zones (SEZs) have been established to foster business growth and innovation by improving the institutional context of specific sub-regional areas. We examine the effect of SEZs on the contribution of research and development (R&D) to the market value of firms located in these areas. The market value reflects investors' expectations of future returns to R&D, providing crucial information for strategic investment decisions. Larger R&D contributions to the market value create stronger incentives for firms to invest in innovation. Empirical results suggest that the contribution of R&D to the market value increases through the SEZs program, particularly for R&D intensive firms. This suggests that regional policies, while increasing incentives to innovate, may widen the gap between less and more R&D intensive firms, potentially impacting competition and long-term growth.

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  • Hussinger, Katrin & Palladini, Lorenzo, 2025. "Do China's special economic zones increase incentives to invest in R&D?," ZEW Discussion Papers 25-028, ZEW - Leibniz Centre for European Economic Research.
    • Handle: RePEc:zbw:zewdip:319898
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    Keywords

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    JEL classification:

    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • R58 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - Regional Government Analysis - - - Regional Development Planning and Policy
    • O25 - Economic Development, Innovation, Technological Change, and Growth - - Development Planning and Policy - - - Industrial Policy

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