Innovation policy in China: nationally promulgated but locally implemented

In China, policies are often announced at the national level but implemented locally. Innovation policies are no exceptions. This article studies China’s 50% R&D tax deduction policy, a key innovation policy promulgated by the central government in 2006. We find that the degree to which the policy was implemented during the period of 2006–2009 varied across the provinces and industries, which in turn had significant impacts on local firms’ innovation output. The findings of the heterogeneity in local implementation of national innovation policies are of important implications for both policy makers and innovation scholars.