Abstract: At the beginning of the 21st century, China’s provinces began to carry out the reform of county-power-expansion. This paper conducts a study based on the quasi-natural experiment with the difference-in-difference methods. The findings show that administrative decentralization has significantly promoted the innovation at the county-level, the results of the robustness test by controlling time trend and other policy impacts, as well as other studies, all support the above conclusions. The results of the placebo test and the using of micro enterprise data also support the above conclusions. The findings of the mechanism test indicate that the administrative decentralization has strengthened the competition among county-level governments, promoted the improvement of infrastructure and the increase of fixed asset investment, thus promoted the increase of the number (scale) of enterprises. At the same time, the administrative decentralization enables county-level governments to make better use of local information advantages, improve resource allocation, thus promote the innovation output at the county-level. This research conclusion can not only help to understand the relationship between administrative decentralization and county-level innovation, but also provide empirical support for the promotion of the innovation and development of county-level economy and the subsequent policy formulation.

Key words: administrative decentralization, county-scale innovation, quasi-natural experiment, difference-in-difference (DID)