Abstract: Zombie firms are those firms that have poor profitability and rely on government support or external financing to survive and not exit the market, which crowd out normal firms, slower economic growth and reduce tax sources. Zombie firms have a large number of bank loans, which bring financial risks to banks, or create pressure on local governments by enjoying financial resources. The disposal of zombie firms is an important part of supply-side structural reform to achieve industrial restructuring and upgrading, and promote the high-quality development of China's economy. Special Economic Zones (SEZs) is an important place-based policy of the Chinese government to promote economic growth, attract foreign investment, and promote scientific and technological innovation. The impact of SEZs on firms' productivity and growth has received widespread attention from scholars, and a natural question is whether SEZs can inhibit the formation of zombie firms? Different from previous studies, which mainly focus on the zombie firms in manufacturing industry, this paper explores the effect of SEZs on the formation of zombie firms in high-tech industry. We use an unbalanced panel dataset of Shanghai science and technology firms from 2008 to 2018, and after removing outliers and missing values, the dataset included a total of 54,629 firms, 160,165 observations. We use real profit method, amended real profit method, amended excessive loan method, and branch method to identify whether a firm was a zombie. We find that the proportion of zombie firms in our sample is 12.8%. After adding the control variables, industry and time fixed effects, the coefficient of dummy variable (SEZ) was -0.006 and passed the significance test at the 1% level. So SEZs inhibit the formation of zombie firms, which reduce the probability of firms becoming zombies by 0.6%. The results are still robust after replacing the dependent variables, using propensity score matching method, and controlling the location of firms. We also test two mechanisms to baseline results. First, SEZs restrain firms from becoming zombies by promoting innovation. SEZs provide a good business environment for firms to operate and innovate, and firms improve their production efficiency and reverse losses through the agglomeration economy, close cooperation network and active innovation activities of SEZs, so the probability of firms becoming zombies is reduced. Second, government subsidies from SEZs increase the probability of firms becoming zombies. SEZs provide a variety of preferential policies for firms, including tax preferences and subsidies. Some firms can continue to survive for the purpose of obtaining policy rent, not filing for bankruptcy and exiting the market. Based on the findings, this paper makes the following policy implications. First, science and technology firms, as the main body of innovation, represent the direction of innovation-driven development, so they are favored and cared for by local governments. But there are also zombie firms surviving in high-tech industry, which suggests governments to adopt reasonable methods to identify them and try to avoid them occupying or rent-seeking valuable policy resources. Second, due to weak operating ability and poor profitability, some zombie firms may have more opportunistic tendencies and put more energy into seeking policy rent. Therefore, SEZs should adopt more inclusive policies and cut down direct subsidies. Third, SEZs should not rely on tax preferences and financial subsidies to achieve short-term effects. The real advantage of SEZs is to create a good environment for firm innovation agglomeration and strong positive externalities, and achieve a virtuous circle of sustainable development.