How do R&D capital market distortions affect innovation efficiency in China? Some evidence about spatial interaction and spillover effects

Improving innovation efficiency (IE) and refining capital market distortions are important considerations for promoting national innovation strategies. This study uses the dynamic spatial Durbin model and mechanism tests to explore the direct impacts, spatial effects, and influencing mechanisms of R&D capital market distortions on IE based on Chinese provincial panel data from 2009 to 2019. The main results can be summarized as follows. First, China's IE is characterized by temporal inertia and spatial agglomeration. In both the spatial and temporal dimensions, IE in neighboring areas in the previous period can inhibit local IE in the current period. Second, R&D capital market distortions have a weakening effect on IE in the short-and long-term. Third, R&D capital market distortions have significant spatial interaction and persistent positive spatial spillover effects on IE. Finally, R&D capital mismatch and technology lock-in effects are essential mechanisms related to R&D capital market distortions that can inhibit IE. Based on these results, policy recommendations have been proposed to improve IE.

Automated summary

This study explores the impacts and mechanisms of R&D capital market distortions on innovation efficiency (IE) using a dynamic spatial Durbin model. The results suggest that IE in China exhibits temporal inertia and spatial agglomeration. R&D capital market distortions have a weakening effect on IE in both short and long term, but they also have significant spatial interaction and positive spatial spillover effects. R&D capital mismatch and technology lock-in effects are identified as essential mechanisms inhibiting IE.