Does the complexity and embeddedness of knowledge recombination contribute to economic development? —— Observations from prefecture cities in China

Knowledge is created by recombinant process and can be transformed into actual productivity and economic performance. In this paper, we conduct research on the impact of regional knowledge recombination on economic development from two dimensions of complexity and embeddedness, in which complexity represents the intensity and diversity of collaborative relationships between different organizations in a given region, and embeddedness refers to the close, yet long-distance knowledge collaborations with an external high-value knowledge pool. We empirically test the validity of our economic development framework using panel data from 275 prefecture-level regions in China between 2005 and 2019. The results demonstrate that both the complexity of knowledge recombination and the external embeddedness can stimulate regional economic development, and the positive relationship of complexity is stronger for regions with a higher level of external embeddedness. There also exists significant heterogeneity impacts in different regions and time periods. The complexity of knowledge recombination plays an essential role in the economic development of the eastern region, but it is relatively less important for the central and western regions. The external embeddedness is essential for the economic development of the central and western regions, but not for eastern China. In addition, the complexity of knowledge recombination and embeddedness made a major contribution to the development of Chinese economy between 2005 and 2014. Lastly, it is worth emphasizing that the effects of the two dimensions of knowledge recombination on regional economic development vary depending on the collaboration types among coauthors. This research serves as a valuable theoretical resource for guiding the design of regional innovation and economic policies.