["International Journal of Finance &Economics, Volume 31, Issue 2, Page 1880-1898, April 2026. ", "\nABSTRACT\nThis study examines the effect of off‐site R&D institutions on exploratory innovation based on the emerging economy of China. The results using a sample of listed firms from 2009 to 2019 show that off‐site R&D institutions can significantly enhance exploratory innovation and firms engaged with off‐site R&D institutions exhibit 58.2% higher exploratory innovation than those without off‐site R&D institutions. To enhance the robustness of the finding, we employ robustness checks using difference‐in‐differences, placebo test, and propensity score matching methods. Further mechanism tests demonstrate that the positive productivity effect is attributed to knowledge base expansion, increased knowledge diversity, and the promotion of R&D cooperation, which is consistent with the knowledge diffusion channel. Our findings contribute to a more comprehensive understanding of technology diffusion across regions in a typical country that is engaged in technology catch‐up.\n"]