TAF PUBLISHING

This paper aims to analyze the relationship between the development of human capital and local innovation across China. Based on provincial panel data collected from 2000 to 2016, a multivariate regression model was constructed based on the OLS method to explore the correlation between human capital development and innovation level on a provincial level. Regression results display a significant positive correlation between the development of human capital and the improvement of local innovation level in the past 16 years. After taking into account other determinants of innovation, including the Gross Domestic Product, industrial structure, tax level, and regional openness, the positive relationship is still robust. On this ground, this paper further discussed regional heterogeneity that existed across China by dividing the provinces into Eastern, Middle, and Western regions according to geographical locations. The regression results showed that human capital generally facilitates the innovation progress across China, and its influence is especially significant in the Western region, followed by the East region. The researchers also used alternative indicators of innovation and human capital to increase the main findings' robustness. Meanwhile, the researchers also added interactive terms to the regression model and jointly discussed the influence of external factors such as marketization and high-tech industries on the beneficial effect of human capital. The results show that a highly market-oriented economy and a high proportion of high-tech industries' contribution to GDP will encourage local innovation. Our research indicates that the government should focus on the development of human capital and industrial upgrading in order to promote the local innovation level, especially in the eastern and western regions.