Does connecting to a less-developed economy stimulate innovation in a more advanced partner? Using the opening of the China-Laos Railway (CLR) as a quasi-natural experiment, this study investigates its transformative effects on regional innovation in Chinese provinces. Integrating a dynamic optimization model with a rigorous staggered difference-in-differences (DID) framework, the analysis reveals that the railway significantly enhances innovation output. Crucially, this surge is driven by “adaptive innovation”, reflecting a market-driven response to the specific developmental needs of ASEAN. We identify a unique “bridging effect”, where connectivity stimulates innovation through the demand-side channel driven by trade geographic concentration and a supply-side channel driven by resource allocation efficiency. These findings challenge the traditional North-South innovation narrative, positioning cross-border infrastructure as a catalyst for converting trade corridors into innovation corridors.
Liu et al. (Sat,) studied this question.
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