Understanding the factors that may produce a sustained rate of innovation is important for promoting economic development and growth. In this paper, we examine the role of human capital in firmsu2019 innovation by using a large sample of manufacturing firms from China. We use two firm-level datasets from China: one from metropolitan cities, and one from provincial small and medium sized cities. Patent applications are used as the measure of innovation. Human capital indicators used include skilled human capital (number of highly educated workers), general manageru2019s education and tenure, and management teamu2019s education and age. We find that skilled human capital has a significant positive effect on firmsu2019 innovation, while the management teamu2019s age has a significant negative effect on innovation. The General Manageru2019s tenure plays a significant positive role in firm innovation in metropolitan cities, while it is the General Manageru2019s education that has a positive and significant effect on firmsu2019 innovation in small and middle cities. We also find that the effect of R&D on patents is insignificant for firms in large cities, but it is positive and significant in the smaller and medium sized cities. We conclude by noting some policy issues for promoting innovation in developing economies.
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