ABSTRACT : The establishment of Free Trade Zones (FTZs) serves as a strategic fulcrum for transitional economies to implement institutional openness and achieve high-quality economic development. This study empirically examines the causal mechanism and dynamic evolution trajectory of FTZ policies on regional innovation capabilities. To overcome the inherent selection bias and endogeneity problems in traditional policy evaluation methods, this paper adopts the Synthetic Control Method (SCM), based on the panel data of Chinese prefecture-level cities from 2006 to 2019, to construct a rigorous counterfactual inference framework. The empirical results robustly identify that the establishment of FTZs has a significant positive treatment effect on regional innovation output. The key point is that this innovation-driven effect exhibits a distinct "J-shaped" dynamic characteristic: there is an incubation period caused by institutional frictions in the early stage, followed by a continuous exponential release of innovation dividends. The mechanism analysis indicates that the negative list management model optimizes the regional innovation ecosystem by reducing institutional transaction costs and stabilizing market expectations. These findings provide solid empirical evidence for the "institutional dividend" hypothesis and offer decision-making references for the differentiated promotion of FTZ strategies.
Derek Doi (Tue,) studied this question.