Can Pilot Free Trade Zones Promote Sustainable Growth in Urban Innovation?

Abstract

China’s pilot free trade zones play an important role in promoting deep-level reform and high-standard opening up. Based on the panel data of 284 prefecture-level cities in China from 2009 to 2021, the article explores the impact of pilot free trade zones on urban innovation using the multi-period difference-in-differences model, mediation effect model, and spatial difference-in-differences model, treating the pilot free trade zone as a quasi-natural experiment. The study shows the following: the establishment of pilot free trade zones boosts sustained growth in urban innovation, and the results still hold after a series of robustness tests; the enabling effect of pilot free trade zones on urban innovation is most significant in eastern regions and large-scale cities; and the role of pilot free trade zones in promoting innovation varies by stage. The mediation impact study revealed that pilot free trade zones can influence urban innovation via talent concentration, foreign direct investment, market scale, and financial support. The pilot free trade zones enhance the innovation performance of its geographically adjacent cities with economic ties and the innovation level of the region. The analysis offers a policy basis for the sustainable growth of urban innovation.