Spatial Concentration of Innovation Activities in China and the Role of Mega‐economic Zones

• Date: 01 March 2019
• Author: Ru Ma,Wan‐Hsin Liu
• DOI: http://doi.org/10.1111/cwe.12273
• Published date: 01 March 2019

China & World Economy / 24–43, Vol. 27, No. 2, 2019

24

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Spatial Concentration of Innovation Activities in China

and the Role of Mega-economic Zones

Ru Ma, Wan-Hsin Liu*

Abstract

This paper analyzes the development of spatial concentration of various innovation

activities in China from 2000 to 2015 by using a generalized Theil index based on a

balanced provincial dataset. It tracks concentration development back to the developing

heterogeneity within and between regions in general and the mega-economic zones in

particular. Results show that innovation activities tend to be distributed unequally across

provinces in China, with more pronounced unequal distribution of innovation outcomes

than innovation inputs. Over the research period, the innovation activities considered

became more and more equally distributed across provinces. The between-region

inequality of innovation activities has, however, not yet signicantly improved, despite

the implementation of Chinese regional policies to encourage more equal regional

development. Instead, more equal distribution of innovation activities within mega-

economic zones is observed.

Key words: innovation, regional policy, spatial concentration, Theil index

JEL codes: O30, O38, O53, R11, R12

I. Introduction

The Chinese government has clearly indicated that the critical challenge currently facing

China is the increasingly unbalanced and inadequate development across regions, which

cannot satisfy all citizens’ growing need for a better life (Xi, 2017). Innovation has been

recognized as the primary engine for the future economic and societal development of

China1 and will play a critical role in determining economic growth in general and the

future development of regions in particular. With some regions failing to keep pace with

*Ru Ma, Postdoctoral Researcher, National Academy of Innovation Strategy, China. Email: ruru0613@163.com;

Wan-Hsin Liu, Senior Researcher, Kiel Institute for the World Economy, Germany. Email: wan-hsin.liu@ifw-

kiel.de.

1The National Medium and Long-term Program for Science and Technology Development (2006–2020) issued

by the State Council of the People’s Republic of China in 2006 and the National Strategy of Innovation-

driven Development released at the 18th National Congress of the Communist Party of China in 2012 are two

prominent examples.

Spatial Concentration of Innovation Activities in China 25

©2019 Institute of World Economics and Politics, Chinese Academy of Social Sciences

developments in innovation over time, the issue of increasingly unbalanced development

across regions in China will not be easily remedied.

Chinese regional development policies generally refer to the four geographic

regions: East, Central, West and Northeast. However, the mega-economic zones (MEZs),

such as Beijing–Tianjin–Hebei (JJJ), Yangtze River Delta (YRD) and Pearl River

Delta (PRD) were also recently included in China’s coordinated regional development

policies (Xi, 2017). Thus, the distribution of innovation activities within and between

these MEZs may also inuence China’s realization of more balanced, innovation-based

regional development.

Against this background, analysis of the development of innovation among the

geographically defined regions in China in general and the MEZs in particular is of

great signicance.2 For a more comprehensive analysis, we consider different types of

innovation activities, as their different features and resource requirements may result in

different developing trends in regional distribution.

Several empirical studies have examined the spatial distribution of innovation in

China. Most found that innovation activities were significantly unequally distributed

across Chinese provinces, with a great portion concentrated in the economically more

advanced provinces (Sun, 2000, 2003; Luo, 2004; Chen and Wang, 2007; Zhang and

Li, 2007; Wei et al., 2011; Cao and Qin, 2012; Jiang, 2013; Bickenbach and Liu, 2014).

Despite a common finding of unequal distribution, previous studies differed in their

results regarding the level and development of regional inequality of innovation in

China as a result of the different datasets used and methodologies applied.

The majority of previous studies used patent statistics for analysis, but using such

data does not take into account the developing trends of different innovation activities.

Sun (2003), Kroll (2010) and Bickenbach and Liu (2014) are the few exceptions

that used different variables to proxy innovation activities for distribution analysis;

however, they obtained different findings as well. Sun (2003) considered research

and development (R&D) expenditure, patent grants and new product sales and found

an upward developing trend in the spatial concentration of innovation activities over

1991–1999 in China. In contrast, Kroll (2010) suggested that the regional inequality of

2Considering the provincial heterogeneity in China, this paper does not argue that completely equal

distribution across provinces would be the best prerequisite for China’s economic development. Nor does it

argue that innovation activities should be concentrated in selected provinces only, for reasons of absorptive

capability (e.g. Cohen and Levinthal, 1990) and geographic proximity (e.g. Liu, 2013), to catch up with

innovation and economic development. The optimal level of innovation distribution is somewhere between

complete inequality and complete equality. Exploring such an optimal level is, however, beyond the scope of

this paper and thus is left to future research.