Abstract

This paper examines whether the government support in favor of firms located in the Haidian district of Beijing, which includes the Zhongguancun Science Park, was effective in terms of innovation and economic performance. We use a dataset of 500 manufacturing firms that results from a merger of the 2007 nation-wide innovation survey and the Annual Survey of Industrial Enterprises databases from the National Bureau of Statistics. We find that among all firms (state-or-collectively-owned, non-state-or-collectively-owned and Hong Kong, Macau, Taiwan or other foreign funded firms) that received direct government support for innovative activities only the non-state-or-collectively-owned domestic firms invested more in innovation than the firms that did not receive such support. However, despite higher government support, domestic firms have lower labor productivity than foreign funded firms, including those funded from Hong Kong, Macau, or Taiwan.