Firm ownership, industrial structure, and regional innovation performance in China's provinces

This paper uses panel data between 2000 and 2010 to explore how firm ownership and regional industrial structures contribute to regional innovation performance in Chinese provinces. Specifically, we explore how the extent of specialization and diversification in regional industrial structures at the province level foster both MAR and Jacobs spillovers, as well as how foreign and state ownership influence regional innovation. We find: (i) China’s regional innovation systems benefit from Jacobs but not MAR externalities, with the former spurring higher quality innovation in the form of increased invention patenting; (ii) state owned enterprises and foreign invested enterprises advance local innovation, with the latter again fostering higher quality innovation; (iii) a convergence towards the combination of low specialization and high diversity in provincial industry is taking place between China’s more developed inland coastal provinces and less developed inland provinces. Implications and suggestions for policy-making and future research are discussed.