Abstract: Based on official statistics showing a significant widening of the economic gap between China’s northern and southern regions since the 2010s,this paper proposes a novel explanation rooted in the differences in innovation systems.This study argues that the distinct innovation systems and their evolution in the North and South determine the innovation capacities and their relative changes,which in turn affect the speed and quality of economic growth in these regions.Statistical analysis reveals a shift in China’s overall innovation capacity from being stronger in the North to stronger in the South between 1985 and 2018.Theoretically,this paper explores how the heterogeneity in innovation systems and their evolution has led to this divergence: the North’s preference for a state-driven innovation system has made it less adaptable to the market-oriented transition,while the South,favoring a market-driven approach,has seen its innovation capacity strengthen.This paper presents seven theoretical hypotheses explaining how differences in innovation systems impact innovation capacity,why the North favors state-driven innovation and the South market-driven innovation,and how these preferences have shaped their respective innovation capacities and efficiencies over time.Empirical analysis further supports these hypotheses.