Roads to Innovation: Firm-Level Evidence from China

32 Pages Posted: 23 Jul 2016

See all articles by Xu Wang

Xu Wang

China Industrial Bank (CIB) Research

Xiaobo Zhang

International Food Policy Research Institute (IFPRI)

Zhuan Xie

Peking University

Yiping Huang

Peking University

Date Written: July 8, 2016

Abstract

Although both infrastructure and innovation play an important role in fostering a country’s economic growth, discussion in the literature about how the two are connected is limited. This paper examines the impact of road density on firm innovation in China using a matched patent database at the firm level and road information at the city level. Regional variation in the difficulty of constructing roads is used as an instrumental variable to address the potential endogeneity problem of the road variable. The empirical results show that a 10 percent improvement in road density increases the average number of approved patents per firm by 0.71 percent. Road development spurs innovation by enlarging market size and facilitating knowledge spillover.

Keywords: CHINA, EAST ASIA, ASIA, infrastructure, innovation, transportation, technology transfer, knowledge diffusion

JEL Classification: O31, O33, R11, R40

Suggested Citation

Wang, Xu and Zhang, Xiaobo and Xie, Zhuan and Huang, Yiping, Roads to Innovation: Firm-Level Evidence from China (July 8, 2016). IFPRI Discussion Paper 1542, Available at SSRN: https://ssrn.com/abstract=2813399

Xu Wang (Contact Author)

China Industrial Bank (CIB) Research ( email )

China

Xiaobo Zhang

International Food Policy Research Institute (IFPRI) ( email )

2033 K Street, NW
Washington, DC 20006
United States
202-862-5677 (Phone)
202-467-4439 (Fax)

Zhuan Xie

Peking University ( email )

No. 38 Xueyuan Road
Haidian District
Beijing, Beijing 100871
China

Yiping Huang

Peking University ( email )

Beijing, 100871
China

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