Introduction: Institutional change is becoming a scarce variable for green innovation
The global carbon neutrality process is elevating green innovation from a technological choice to a core variable of national economic competitiveness. China's global leadership in the number of green patents and the scale of its green industries is no longer news; the real challenge lies in how to shift from a factor-driven, fragmented "patent production" model toward a systematic, collaborative, and sustainable innovation capacity. A study published in *Humanities and Social Sciences Communications* links this transformation to China's "institutional opening-up" strategy and offers an answer worthy of attention from the international investment community: institutional change, with free trade zones as its vehicle, can substantially improve the health of urban green innovation systems, and its core transmission mechanism is not fiscal incentives but cross-regional knowledge spillovers.
This finding is signal-significant for global capital because it shows that the underlying logic of China's attraction of high-quality investment is changing—from a cost depression to an institutional node. Foreign investment location choices no longer depend solely on market size and infrastructure, but increasingly on the accessibility of regional innovation networks. Institutional opening-up is precisely the policy instrument that reconfigures such accessibility.
From quantity to system: redefining green innovation competitiveness
Conventional perspectives often measure innovation performance by the number of patents. But the analytical starting point of this study is more ambitious: it treats green innovation as a three-dimensional system composed of scale growth, sustainability investment, and knowledge accumulation. In other words, a healthy green innovation system is not just more patents; it is the ability to achieve co-evolution among expansion, stability, and the knowledge base. This is precisely the structural problem that most economies face in the current global green race.
The study uses panel data from 286 Chinese cities from 2008 to 2023, taking the establishment of free trade zones as a multi-period quasi-natural experiment to identify the net effect of institutional opening-up on the above three-dimensional system. The results show that institutional opening-up has a significant and robust positive impact on green innovation systems. For an economy transitioning from manufacturing and patent-count expansion to high-quality development, this amounts to providing a verifiable reform path.
Mechanism comparison: knowledge spillovers are more powerful than government investment
In exploring the transmission mechanisms, the study distinguishes two pathways: local government fiscal investment in green innovation, and cross-regional green knowledge spillovers. The more important finding is that the latter contributes more than the former. This means that the real return from institutional opening-up is not simply an increase in public funding, but rather the ability of knowledge to flow, combine, and generate secondary innovation across broader institutional and geographical boundaries.From the perspective of multinational enterprises, this conclusion directly changes the valuation method for free trade zones. Free trade zones are not simply tax-reduction compliance discount zones, but are more likely to serve as "green knowledge access points"—entering them means being able to integrate into the vast knowledge network that China has already accumulated in green manufacturing, engineering, and data. If capital still views free trade zones as an extension of low labor costs, it is likely to underestimate their strategic value.
Structural Optimization and Regional Differences: The Refined Impact of Institutional Opening
The structural findings complement this: institutional opening has a stronger promotional effect on invention patents than on utility model patents. This suggests that its function is not to stimulate short-cycle, low-complexity technologies, but rather to guide enterprises and research institutions toward deeper innovation with greater long-term strategic value. This is a positive signal for intellectual-property-intensive multinational investors, foreshadowing a more reliable ecosystem for intellectual property cooperation.
Regional heterogeneity also provides annotations for the "dual circulation" strategy and "coordinated regional development." Research shows that institutional dividends are more significant in ordinary prefecture-level cities and eastern cities; the economic base has a positive moderating effect, while the amplification effect of city size applies only to eastern cities. An intuitive explanation is that the industrial clusters and opening-up experience in the eastern region enable the scale advantages of large cities to be transformed into genuine innovation synergies; whereas central and western cities, even with relatively large populations, still lack the foundational conditions to absorb institutional dividends into innovation momentum. The insignificant impact of environmental regulation, meanwhile, suggests that the net benefits of opening do not rely on the forced-innovation effect of environmental tightening, but rather come from efficiency gains brought about by resource reorganization.
Concluding Observation: Green Capital Will Flow Toward Nodes with Higher Institutional Openness
Broadening the perspective to the global stage, three trends in current transnational direct investment—greenization, knowledge intensification, and security orientation—are occurring simultaneously. China's institutional opening in free trade zones happens to sit precisely at the intersection of these three trends. Research reveals that institutional opening can optimize the structure of green innovation without relying on the intensity of environmental regulation, and can promote the diffusion of knowledge toward the eastern region and general prefecture-level cities. This implies that the future distribution of green capital will not simply follow the traditional urban hierarchy, but may shift toward those medium-sized cities that actively experiment with high-standard rules and have already formed industrial synergies.
For local governments and park operators, the implication is this: competition for investment in the next phase will no longer be about subsidies or land, but about the precision of institutional design—how to enable chemical reactions between regional innovation actors and external knowledge, and how to make public investment effectively catalyze spillovers in the private sector. Institutional opening is becoming the "infrastructure" of green innovation systems, with a longer payback period, yet one that is also far more difficult to replicate.