Peer effects in R&D investments: evidence from China’s science and technology parks programs

ABSTRACT

We investigate whether science and technology parks (STPs) can stimulate on-park firms’ R&D investments and subsequently spread out to off-park peer firms. We employ a novel setting derived from a place-based policy: level upgrading of STPs, which sharply increases the park scale and policy supports granted to STPs. We use a difference-in-differences approach and regard firms in the same city but outside the park as the control group. Empirical evidence shows that firms undergoing STPs’ promotion will significantly increase their R&D investments, which further leads to peer firms outside the parks to also increase their R&D input due to the competitive pressures. Furthermore, this causal effect is not driven by the demonstration effects of megacity and industrial leaders. Our findings enrich the literature on the effectiveness of STPs and their externalities.

KEYWORDS:

• Peer effects
• science and technology park
• R&D investment
• difference-in-difference

JEL CLASSIFICATION:

• C23
• D21
• D62
• D78
• L60
• O32
• O38

Disclosure statement

No potential conflict of interest was reported by the author(s).

Correction Statement

This article has been republished with minor changes. These changes do not impact the academic content of the article.

Notes

¹ In China, there are two types of STPs: provincial-level and national-level. STPs upgrading means that a STP is approved to upgrade from provincial level to national level. After that, the STPs can get more policy and financial support and become bigger.

² The data of R&D inputs for listed firms is not available before 2006 at which new disclosure policy related to R&D is implemented that refine the patterns for listed firms to disclosure the R&D expenses. In addition, we list the detail information for STPs upgrading events in Appendix Table A3.

³ Refer to http://www.chinatorch.gov.cn/gxq/index.shtml.