IDEAS home Printed from https://ideas.repec.org/p/boa/wpaper/202414.html
   My bibliography  Save this paper

Unlocking Innovation: The Impact of Free Trade Zones on Corporate Innovation in China

Author

Listed:
  • Ruiyang Hu

    (Department of Economics, University of Macau)

  • Chen Yin

    (School of Social Development and Public Policy, Fudan University)

  • Zhijie Zheng

    (Bay Area International Business School, Beijing Normal University.)

  • Sili Zhou

    (Faculty of Business and Administration, University of Macau, and Asia-Pacific Academy of Economics and Management, University of Macau)

Abstract

If the domestic market operates under an inefficient economic structure, then access to foreign markets can lead to long-term benefits. In this paper, we examine the effect of free trade zones (FTZs), a progressive trade liberalization program, on corporate innovation. By using data on Chinese publicly listed firms, we find that firms operating in FTZs experience significant increases in their innovation output. These positive effects are primarily attributed to the easing of financial constraints, increased market competition, and improved access to foreign markets, even though their effects on the quantity and quality of corporate innovation can be noticeably distinct. Our empirical findings are rationalized by a simple Schumpeterian model with endogenous quality improvement, and they provide implications for policymakers to promote domestic firm growth in the global marketplace.

Suggested Citation

  • Ruiyang Hu & Chen Yin & Zhijie Zheng & Sili Zhou, 2024. "Unlocking Innovation: The Impact of Free Trade Zones on Corporate Innovation in China," Working Papers 202414, University of Macau, Faculty of Business Administration.
    • Handle: RePEc:boa:wpaper:202414
    as

    Download full text from publisher

    File URL: https://fba.um.edu.mo/wp-content/uploads/RePEc/doc/202414.pdf
    Download Restriction: no
    ---><---

    More about this item

    Keywords

    Free Trade Zone; Corporate Innovation; Financial Constraint; Market Competition; Trade Liberalization;
    All these keywords.

    JEL classification:

    • G30 - Financial Economics - - Corporate Finance and Governance - - - General
    • G31 - Financial Economics - - Corporate Finance and Governance - - - Capital Budgeting; Fixed Investment and Inventory Studies
    • G32 - Financial Economics - - Corporate Finance and Governance - - - Financing Policy; Financial Risk and Risk Management; Capital and Ownership Structure; Value of Firms; Goodwill
    • O19 - Economic Development, Innovation, Technological Change, and Growth - - Economic Development - - - International Linkages to Development; Role of International Organizations
    • O30 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - General

    NEP fields

    This paper has been announced in the following NEP Reports:

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:boa:wpaper:202414. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Carla Leong (email available below). General contact details of provider: https://edirc.repec.org/data/fbmacmo.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.