Can urban cluster policies improve innovation? Evidence from China

Using a city-level panel data from 2010 to 2019, this study draws on quasi-natural experiment generated by the establishment of national-level urban clusters and employs the multi-period difference-in-differences (DID) method to investigate its causal effect on urban innovation. The findings are as follows: (1) Urban Cluster Policy (UCP) significantly promotes the level of urban innovation in the region, presenting the economic radiation effect of the central city on the non-central city rather than Siphon effect. (2) The underlying mechanism is the agglomeration in economic development and human capital, and the increase in R&D expenditure. (3) Heterogeneity analysis reveals that UCP is more effective in enhancing urban innovation in small-medium cities, eastern coastal cities, and those within the cluster group of relatively low regional disparities.