Does Greater Knowledge Complexity Promote Structural Upgrading? Evidence From Chinese Cities

ABSTRACT Does knowledge complexity facilitate the upgrading of industrial structures? The paper analyses whether greater knowledge complexity promotes industrial structure upgrading from the three dimensions: complex knowledge accumulation, creation and diffusion. We emphasize that the local accumulation and creation of complex knowledge can promote innovation agglomeration, characterized by frequent innovation activity and high‐tech industry concentration, leading to structural upgrading. Furthermore, the diffusion of complex knowledge among regions bridges regional differences and produces spatial spillover effects on structural upgrading. We chose China, a developing country, as our research setting, and used Chinese patent data to measure the knowledge complexity of 281 cities in China from 2004 to 2016 to verify the theoretical hypotheses. Our findings demonstrate that developing countries can follow a new path toward industrial structure upgrading by strengthening the innovation agglomeration effect of complex knowledge.