Institutional reform, path development and firm creation: evidence from China

Wang, Han and Rodríguez-Pose, Andrés ORCID: 0000-0002-8041-0856 (2025) Institutional reform, path development and firm creation: evidence from China. Cambridge Journal of Regions, Economy and Society. ISSN 1752-1378

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Abstract

This paper examines whether and how government-led institutional changes can reshape regional industrial development trajectories. Using quarterly panel data from Chinese cities between 2019 and 2024, we assess the impact of reforms of the business environment on firm creation within both path creation and path dependent industries. Applying a staggered difference-in-differences approach combined with coarsened exact matching, our findings reveal that business environment reforms significantly increase firm creation in path creation industries, especially in high-tech sectors and cities with initially weaker business environments. Key mechanisms identified include enhancements in the market environment and government services, which are central to driving these effects.

Item Type:	Article
Additional Information:	© The Author(s) 2025
Divisions:	Geography and Environment
Subjects:	H Social Sciences > HD Industries. Land use. Labor
JEL classification:	O - Economic Development, Technological Change, and Growth > O1 - Economic Development > O11 - Macroeconomic Analyses of Economic Development R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, and Changes R - Urban, Rural, and Regional Economics > R1 - General Regional Economics > R12 - Size and Spatial Distributions of Regional Economic Activity; Interregional Trade
Date Deposited:	28 Oct 2025 09:42
Last Modified:	01 Nov 2025 04:22
URI:	http://eprints.lse.ac.uk/id/eprint/129990

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