Inside China's 'Growth Miracle:' A Structural Framework of Firm Concentration, Innovation and Performance with Policy Distortions

Since the first economic reforms were enacted in 1978, China experienced double digit growth for over three decades leading it to become the second largest economy by 2010. What accounts for China's unparalleled economic growth in a relatively short time period? To provide new insights into the unique dimensions of China's spectacular growth "miracle", this dissertation relies on a set of micro-economic analyses into the changing firm, industrial and regional dynamics underway in China. Drawing from theories emanating from the innovation, economic geography and public policy literatures, a key aspect of this research empirically estimates the direct and cross-scalar interaction effects of firm-level characteristics, industrial agglomeration and the policy environment on firm performance. Using detailed firm-level data, the heterogeneous short- and long-run impacts of policy-induced economic distortions are respectively evaluated within three separate relationships to firm performance: (1) innovation; (2) agglomeration; and (3) a geo-economic innovation framework. The results produced in this dissertation highlight the importance of institution building, coinciding along with the need to reduce the role of state intervention in the market. Building a solid institutional environment reduces the high risks associated with pursuing innovation and will help facilitate the transfer of tacit knowledge leading to positive externalities, thereby reducing firm dependency on state protectionism, and spurring firm competitiveness.