The Comparative Advantage of Cities and Innovation Value Chain: Evidence from China

Abstract

Cities are different in industrial structure; some are specialized while others are diver-sified. Based on the theory of the innovation value chain, this paper used the innovation data of industrial enterprises from 2008 to 2014 in China to test the comparative advantage of cities in innovation. Our empirical results proved that diversified cities are more suitable for the R&D process of innovation through the labor matching effect and the knowledge spillover effect, while specialized cities are more suitable for the commercialization process through cost-saving effect. Enterprises could choose suitable locations due to their positions in the innovation value chain to achieve sustainable development.