Special Economic Development Zones and Firm Dynamic Growth: Research Based on Firm Entry, Exit and Growth

Zhang Guofeng; Wang Yongjin; Li Kunwang

doi:doi:10.16538/j.cnki.jfe.2016.12.005

Abstract

Does the rapid growth of development zones stem from short-term false prosperity resulting from policy rents or long-term performance formed from rapid firm growth through agglomeration effect in the end? The solution to this question is of great importance to the evaluation of the effectiveness of development zone policy and further perfection. However, existing research is vague about this question. By identifying firms from development zones, this paper empirically tests the role of development zones in firm entry, exit and growth as well as the sustainability of the growth effect of development zones. Then it reveals the micro mechanisms of the effect of development zones on regional economic growth. It arrives at the conclusions as follows:firstly, development zones attract effective firms to enter, and reduce the exit risks of firms in development zones, thereby leading to the significant increase in the net number of firms entering development zones and meaning that favorable policies are really the important factors attracting firms to locate in development zones and strengthening the agglomeration economy; secondly, development zones significantly improve firm growth rates of employment, productivity and sales, that is to say, development zone policies and agglomeration economy can bring a rapid growth for firms; thirdly, policy rents bring short-term rapid growth and self enhanced agglomeration economy in development zones plays a long-term promotion role in firm growth, showing the sustainability of growth effect of development zones. This paper affirms the long-term positive effect of development zone practices on firm dynamic growth. It not only provides more comprehensive understanding for the performance evaluation of development zone policies, but also offers important enlightenment for further growth and perfection of development zones.