Relatedness, Complexity, and Economic Growth in Chinese Cities

Abstract

Innovation is generally regarded as critical to long-run economic growth. Recent work, at different spatial scales, suggests economies that develop more complex technologies that are related to their existing knowledge stocks enjoy a growth premium. Thus, “smarter” forms of innovation may accelerate growth. These claims are examined using Chinese patent data distributed across 286 cities over the period 1991–2015. Fixed-effects panel models report that city-level GDP growth in China has a significant and positive relationship with diversification into more related and complex technologies, after controlling for the overall pace of innovation and other covariates. Robustness checks focusing on spatial autocorrelation and endogeneity affirm the core findings.