Effect of Special Economic Zones on Innovation : Evidence from Chinese High and New Technology Firms in the Pearl River Delta

Fruitful studies have discussed the relationship between Special Economic Zone (SEZ) and firm performance. However, the relationship between SEZ and firm innovation performance in the context of the Chinese high and new technology (HNT) industry remains unclear. The instrumental variable estimation is used in this study to explore the effect of SEZs on the innovation performance of the Chinese HNT industry. I find that SEZs have a positive impact on HNT firm innovation output, and such impact varies across ownership structures. To be specific, foreign owned firms located in the SEZs exhibit superior innovation output. However, private and state-owned firms do not benefit from the policy of SEZs.