Matching city-level and province-level GDP data with firm headquarters' locations for a sample of Chinese listed firms from 2003 to 2015, we find that firm locations are positively and significantly associated with firm innovation. In addition, firms with higher government grants have higher R&D inputs. The gap between firms' innovation performance in ordinary cities and in non-ordinary cities is not significant in the eastern region; however, the gap is significant in the central and western regions of China. Finally, we use firm relocation to tackle the endogeneity issue and find that firms relocated to cities with larger size of economy are associated with higher innovation performance.
- headquarter relocation