Eleventh Global Studies Conference

Abstract

In China, the innovation economy appears to receive full government support at the national level, leading to the rise of major innovation hubs like Shenzhen. However, innovation economy did not bloom in all major cities of China, especially in the north. We argue that competing economic and political goals create different incentives for other local governments, leading to regional divergence in regulatory choices. To examine how officials approach the expansion of innovation economy and what institutional choices they subsequently make to govern the sector, this paper maps the evolving institutions for the innovation economy in Tianjin. Owning a large proportion of state-owned enterprises, Tianjin’s socio-economic conditions and political challenges are more representative of the country than innovation hubs. We report evidence on three propositions. First, local officials are aware of the governance risks that the innovation economy presents although they admire its potentials for sustainable growth, which is the main criterion to measure Chinese officials’ performance. Second, officials adopt changes in the governance regime to contain and direct growth away from these risks. Third, local government’s industrial policies have a positive impact on the businesses in corresponding subcategories of the innovation economy. We measure the performance of local start-ups by applying a model with two independent variables: number of documents local governments forwarded from the central government and number of documents issued by local governments in the innovation economy. By examining cross-regional policy implications in Beijing, Tianjin, and Hebei, we interpret results as a part of China’s authoritarian resilience.