The Belt and Road Initiative and cascading innovation in China’s domestic railway ecosystem

This paper explores innovation in the context of the Belt and Road Initiative (BRI). Adopting a network view of innovation ecosystems, we argue that the Chinese government’s BRI practice of selecting and financing a limited number of companies – BRI firms – for foreign projects leads to a cascading innovation effect across firms in China’s domestic railway innovation ecosystem. We hypothesize that a firm’s innovation performance is positively related to its network proximity to and knowledge complementarity with BRI firms. We further propose that the positive relation between knowledge complementarity and innovation is stronger for private firms than state-owned enterprises (SOEs). We test our hypotheses using network and patent data that we have collected from China’s railway sector during the period 2013–2019 and find econometric evidence in line with our predictions. By combining network theory and ecosystem perspective, this study contributes to a better understanding of the impact of BRI on domestic innovation within China.