Has the upgrading of provincial development zones promoted innovation? Evidence from county-level data in China’s optimized development areas

The Optimized Development Area (ODA) serves as a prominent innovation hub in China. Within this context, the upgrading of Provincial Development Zones (PDZs) to National Development Zones has become a key policy instrument for promoting innovation-driven growth. Drawing on county-level data from the ODA and employing a difference-in-differences framework, this paper examines the innovation effects of PDZ upgrading and the underlying mechanisms. The results show that PDZ upgrading significantly increases the quantity and quality of corporate innovation while having no significant effect on the innovation structure. Mechanism analysis indicates that policy effects and agglomeration effects are the primary channels through which innovation is stimulated. Furthermore, a tripartite spatial embeddedness framework demonstrates that the innovation effects are strongest for firms that are institutionally proximate, administratively connected, and organizationally embedded. This finding underscores the importance of spatially contingent policy transmission. These findings provide robust evidence that PDZ upgrading can effectively promote innovation at the county level, particularly when firms are closely aligned with local institutional and organizational contexts. They contribute to the literature on development zones and innovation policy and offer practical guidance for optimizing governance structures, spatial layout, and innovation-led growth strategies.