Affiliation:
1. Henan University of Technology, Zhengzhou, Henan, China
2. Xi’an Jiaotong University, Xi’an, Shaanxi, China
3. Xi’an International Studies University, Xi’an, China
Abstract
Analyzing the impact of economic openness and institutional environment on technological innovation is of great significance for China to build a new system of open economy. This study investigates the short- and long-run effects of economic openness and institutional environment on innovation by applying a dynamic panel regression model and two-step system generalized method of moments (GMM) method to dynamic panel data of China’s 30 provinces, autonomous regions and municipalities directly under the Central Government (referred to as provinces hereafter) from 2008 to 2017. Results indicate that trade openness impedes innovation, whereas foreign direct investment (FDI) significantly promotes China’s innovation particularly in the long-run. The continuous improvement of institutional environment promotes domestic innovation particularly in the long run. The integration of economic openness and institutional environment magnifies the effects of trade openness and FDI on innovation. The effects of economic openness and institutional environment on innovation differ by region with a descending pattern from China’s Eastern to the Central and Western regions.
Funder
Humanities and Social Science Fund of Ministry of Education of China
Soft Science Research Program Funded by Shaanxi Provincial Science and Technology Department
Key Research Base Project of Humanities and Social Science in Shanxi Province
Key Project of National Social Science Foundation of China
Scientific Research Program Funded by Shaanxi Provincial Education Department
Research Fund of Xi’an International Studies University
Social Science Fund Project of Shaanxi Province
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