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Fostering Enterprise Innovation: The Impact of China’s Pilot Free Trade Zones

Author

Listed:
  • Ting Lei

    (Shandong University of Finance and Economics)

  • Ping Xie

    (Yantai Institute of Technology)

Abstract

In the ever-changing global landscape, economic development opportunities arise from novel circumstances. Economic globalization and the rapid internationalization of enterprises are promoting international economic growth. Concurrently, domestic economies transition from high-speed growth to superior-quality growth. Amidst this complexity, innovation emerges as a catalyst for enhancing enterprise quality and global competitiveness. China’s pilot free trade zones (FTZs), established in 2013, serve as experimental platforms to drive policy experimentation, attract foreign investment, and streamline cross-border trade. This study examines the impact of these zones on enterprise innovation using patent application data from China’s A-share listed companies between 2011 and 2020. While existing research often focuses on macroeconomic FTZ impacts, this study explores microeconomic implications on individual enterprises. Using Shanghai and Shenzhen A-share listed companies, a multi-period difference-in-differences method is employed to explore the influence of FTZ establishment on innovation output. The findings reveal that FTZs enhance enterprise innovation output, with heterogeneity across technology-intensive and state-owned enterprises. Financial constraints are identified as a mechanism linking FTZs to innovation. Theoretical implications emphasize the positive correlation between FTZs and innovation output, highlighting policy-driven incentives. Heterogeneity insights offer tailored interventions for diverse enterprise profiles. The study enriches innovation understanding, contributing to policy formulation. Managerial implications underscore FTZs’ dynamic catalyst role in enterprise innovation. Recommendations are offered for policymakers and practitioners to leverage FTZs for fostering innovation and economic growth. Ideas for future research suggest longitudinal analyses, global comparisons, and in-depth policy mechanism exploration. As the world economy evolves, FTZs emerge as key players in shaping innovation trajectories.

Suggested Citation

  • Ting Lei & Ping Xie, 2024. "Fostering Enterprise Innovation: The Impact of China’s Pilot Free Trade Zones," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 15(3), pages 10412-10441, September.
    • Handle: RePEc:spr:jknowl:v:15:y:2024:i:3:d:10.1007_s13132-023-01501-8
    DOI: 10.1007/s13132-023-01501-8
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