Can industrial transfer improve urban innovation efficiency?

Investigating whether industry transfers to different cities and regions contribute to innovative efficiency improvement is a critical issue in addressing the development of urban innovation. Using the implementation of national industrial relocation demonstration zones (NIRDZ) in China as a quasi-natural experiment, this study empirically assesses the impact of industrial relocation upon urban innovation efficiency. This study first measures the urban innovation efficiency of 194 prefectural cities during 2005-2019 using a two-stage data envelopment analysis model. Then, a multiperiod difference-in-differences model is used to evaluate the innovation effects of national-level demonstration zones for undertaking industrial transfers. The results are as follows. First, industrial relocation does contribute to urban innovation efficiency. This conclusion is supported by a series of robustness tests confirming that the NIRDZ pilot policy indeed contributes to this efficiency, including a placebo test, propensity score matching, shortened time window, winsorized outliers, and lag treatment. Sec-ondly, a regional heterogeneity analysis shows that the pilot policy significantly promotes innovation efficiency of cities located in the central region, but there is an insignificant effect in western region cities. The analysis of city size heterogeneity shows that the pilot policy promotes innovation efficiency more significantly in small cities. In contrast, the promotion effect on big cities is not significant. Third, when considering the potential impact mechanisms, the NIRDZ policy positively affects urban innovation efficiency by enhancing the infor-matization level and improving economic development. Based on the analysis above, this study recommends establishing an effective mechanism for industrial transfer, realizing the transfer between different regions and cities according to local conditions, and deepening the NIRDZ policy implementation. Policymakers should also increase investment in the construction of an informatization platform, plan resource usage rationally, promote regional integration development, change the philosophy of education, and recognize how the NIRDZ policy influences urban innovation through economic development and informatization.