Changing institutional context and regional industrial dynamics: New evidence from the establishment of administrative approval centers in China

The role of institutions in regional industrial dynamics has been a long-lasting issue in economic geography and regional studies. This paper seeks to examine this issue in the context of transitional economies, where the market economy is embryonic, by using China as an example. Specifically, we examine how regional industrial dynamics have been shaped by China's peculiar institutional context in general and by its new round of economic reform in particular. One key part of the new reform is the establishment of administrative approval centers (AACs) to streamline official procedures that regulate business start-ups and existing business. Empirical results show that the establishment of AACs has boosted new industry creations. However, in the first 3 years after the establishment of AACs, the effect of AACs on new industry creation is not evident and becomes significant afterwards. Furthermore, the effect varies across regions and industries. It is especially evident in less marketized cities. Labor-intensive industries benefit more from the establishment of AACs than do capital-intensive industries.