Do national innovation policies lead to technological specialization or diversification? The role of path dependence and spatial spillovers

Abstract

Although most national innovation policy aim to promote urban innovation, their impact on technological specialization and diversification has not been thoroughly explored. This paper examines the impact of the National Innovation City Pilot Policy (NICPP) on technological specialization and diversification in Chinese cities, utilizing data from 282 cities between 2006 and 2019, and employing the difference-in-differences (DID) method. The results indicate that NICPP increases technological specialization while decreasing diversification in cities. The pathways to these outcomes include innovation path dependence, agglomeration effects, and a reduction in breakthrough innovations. Additionally, the policy's spatial spillovers contributed to technological specialization in peripheral areas. The study highlights the heterogeneity of policy effects, suggesting that cities with higher levels of initial specialization are more significantly impacted by these policies, while differences in resource endowment, geographical location, and city size lead to varying patterns of specialization. Moreover, the study verifies the synergistic effect of NICPP with other policies, where initiatives promoting high technology and environmental regulation work in conjunction with NICPP to enhance specialization in corresponding industries. This study offers a comprehensive analysis of the multifaceted impacts of NICPP, delivering theoretical insights and empirical evidence for strategic policy deployment, enhancing regional cooperation, and fostering synergies among policies.