Spatial processes are highly relevant phenomena in innovation studies. Regional innovation is both influenced by heterogeneous regional attributes and the neighbouring innovation factors. Spatial econometrics are developed to explicitly cope with the issues of spatial dependence. This paper aims to reveal the spatial processes of regional innovation at the city scale by including the spatial terms in panel data specification. The research region, Guangdong Province, has developed into one of innovation hubs in China. Panel data set in 21 municipalities in Guangdong Province over the period of 2001–2013 has been established. The spatial panel data model shows that regional innovation in Guangdong is driven by R&D expenditure input. Besides, inflow of external knowledge boosts the innovation output through foreign investment stock and imported goods, and it strengthens its role as innovation impetus for the neighbouring cities with the spatial spillover effect. Meanwhile, the depth and width of knowledge accumulated by specialisation economy and diversification economy contribute to innovation both for the city itself and the neighbouring cities. Overall, the paper has succeeded in revealing the effect of spatial dependence of innovation output, as well as the ‘spilling over’ of the innovation factors on distance-based spatial relations.