The impact of R&D factors flow and regional absorptive capacity on China’s economic growth: Theory and evidence

Innovation is the source of economic growth. Innovation in a region comes from its own knowledge creation and knowledge spillovers from other regions. Previous studies showed that R&D factors flow benefits knowledge spillover, thereby promoting economic growth. But these studies ignored the impact of a region's knowledge-absorptive capacity on knowledge spillovers. Ignoring the impact of regional absorptive capacity means that the knowledge spillover from the same R&D factors flow is the same, clearly inconsistent with reality. This thesis analyzes the impact of R&D factors flow on economic growth and explores the moderating effect of regional absorptive capacity on the relationship between R&D factors flow and economic growth from theoretical and empirical perspectives. First, we construct a knowledge creation and diffusion model of the new economic geography, including regional absorptive capacity, and analyze the theoretical logic of the flow of R&D factors and regional absorptive capacity influencing economic growth. Second, we employ spatial econometric models to examine the impact of R&D factors flow and regional absorptive capacity on economic growth, utilizing panel data of 30 provinces in China from 2008 to 2021. The results demonstrated a spatial positive correlation between regional economic growth in China. The R&D factors flow could have significantly promoted not just a region's direct economic growth, but also the economic growth of surrounding regions via spatial spillover effects. Furthermore, the stronger the regional absorptive capacity, the greater the direct effects and spatial spillover effects of the R&D factors flow on economic growth. The novelty of this article is to introduce regional absorptive capacity into the theoretical model, refine the methodology for assessing regional absorptive capacity in empirical research, and examine its moderating effect between the inflow of R&D factors and regional economic growth. This article reveals that the positive impact of the inflow of R&D factors on spatial spillovers and economic growth varies depending on regional absorptive capacity. According to the conclusions above, enhancing regional absorptive capacity is equally important as facilitating the flow of R&D factors. Therefore, it is vital for a region to strengthen its absorptive capacity for new knowledge while promoting R&D factors flow. The study provides valuable policy insights for accelerating the flow of innovation factors, enhancing regional absorptive capacity, and consequently promoting long-term sustainable economic development in the region.