The Effects of Constructing National Innovative Cities on Foreign Direct Investment

Abstract

National innovative city pilot project plays a vital role in improving the level of national independent innovation and also in concentrating on higher quality economic growth. Based on the panel data of 213 cities in China from 2003 to 2018, the paper uses difference-in-difference (DID) method to empirically examine the effect of constructing national innovative cities on foreign direct investment (FDI). Results show that the national innovation city pilot policy generally shrinks the scale of FDI, and has a greater effect on prefecture-level cities when municipalities directly under the central government, provincial capitals and sub-provincial cities are removed from the samples. These findings highlight the significance of improving independent innovation and attracting high-quality FDI.