Orchestrating Resources, Bridging Regions: How Funding Mix Shapes University-Driven Innovation Across China

• In Event: Governing Innovation: AI, Infrastructure, and Global Public Value

Abstract

Introduction / Background

Regional innovation systems (RIS) are vital engines of economic upgrading, yet they seldom operate on a level playing field—especially in China, where east-west and coastal-inland disparities divide the national innovation landscape. Patents licensed or assigned by universities are a cornerstone of these systems because they convert publicly funded scientific discoveries into private value. Although prior studies agree that money matters, they rarely ask whose money—governmental or industrial—carries more weight, or how local institutional conditions amplify or blunt that weight. Without such knowledge, policymakers risk misallocating scarce funds and widening, rather than narrowing, spatial innovation gaps.

Purpose / Research Questions

We probe four questions: (1) Does industrial funding (IF) outperform governmental funding (GF) in boosting regional patent-based innovation outputs? (2) How do provincial resource endowments and institutional quality moderate each funding effect? (3) Through what mechanisms does each funding source translate into sustained competitive advantage? (4) What policy mix best supports lagging regions without stifling leaders?

Method

Drawing on the resource-based view and RIS, we constructed an unbalanced panel covering 31 Chinese provincial units for 2016-2023, merging data from the Annual Compilation of Statistics on Science and Technology in Institutions of Higher Education from the Ministry of Education with regional data from the National Bureau of Statistics. We estimated fixed-effects models that regress annual counts of successfully commercialized university patents on lagged GF and IF flows, while controlling for regional GDP per capita, research intensity, number of higher education institutions, and human-capital stocks. To address potential reverse causality (i.e., successful regions attracting more funding), we employed two instrumental-variables strategies: (i) historical earmarks in central-government science funds for GF and (ii) exogenous shocks to global supply-chain demand for IF. A battery of robustness checks—including comparison between eastern and western economic regions and random-effects specifications—confirmed the stability of our results.

Results / Findings

Both funding streams raise innovation performance, but IF’s marginal effect is roughly three times that of GF (β = 0.044 vs. 0.014, p < 0.01). Interviews with tech-transfer officers and supplemental event-study tests suggest that IF accelerates commercialization because firms demand tighter IP timelines and provide complementary market knowledge. Our comparison result reveals pronounced regional asymmetries: in resource-constrained western provinces, each yuan of either funding type yields higher returns than in eastern hubs, but the gap is widest for IF (β = 0.046 west vs. 0.014 east). Strong local governance magnifies GF effectiveness, whereas high absorptive capacity amplifies IF impacts.

Conclusion / Implications

The study advances RIS and RBV scholarship by showing that “who funds” matters as much as “how much,” and that institutional context sets the conversion rate between financial inputs and innovation outputs. Policy portfolios that blend IF’s market-responsive discipline with GF’s capacity-building stability—and calibrate that blend to local governance and absorptive-capacity profiles—can narrow China’s spatial innovation divide without capping its leading regions. More broadly, the findings offer emerging economies a roadmap for pairing resource orchestration with place-based policy to foster inclusive, technology-driven growth.

Authors

• Yangchen WU, The Hong Kong University of Science and Technology (Guangzhou)
  Presenting Author

• Xun Wu
  Non-Presenting Co-Author