It has been well documented that cross‐listing can improve firms' governance quality and reduce equity financing costs, which are crucial for firms' innovation activities. In this paper, we investigate the effect of cross‐listing on the Hong Kong (HK) market on the innovation performance of Chinese mainland firms. We find that both innovation outputs and qualities increase significantly when Chinese mainland firms list their shares on the HK market. Concerning the channels through which cross‐listing encourages innovation, we demonstrate that cross‐listed firms can raise low‐cost funds in the HK market, which facilitates their innovation activities. Moreover, the HK market generates more informative stock prices, which mitigate innovation information asymmetry and also encourage firms' innovation. In general, our paper sheds light on a new factor (cross‐listing) that motivates firms to engage in innovation and highlights cross‐listing's function in improving innovation.

Zhongshan is a famous hometown to many overseas Chinese. Overseas Chinese from Zhongshan living abroad are concerned about the urban development of their hometown and have offered tremendous financing resources. They have returned to their hometown and participated in government, invested in municipal development, improved public services, established industry and donated to schools. These efforts not only led to Zhongshan’s business economy boom, but also effectively promoted the urban construction process of modern Zhongshan. This paper traces the urban construction in Zhongshan during the period of the Republic of China, and investigated the great contributions of overseas Chinese to the urban development of modern Zhongshan.

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