Does Digital Economy Investment Promote Sustainable Competitiveness by Creating New Industry?

Abstract

This study explores how governmental and regional investments in the digital economy foster the emergence of new industries and the region's sustainable competitiveness. In particular, we focus on the creation of the big data comprehensive pilot zone (BDCPZ) in China that serves as a proxy for digital economy advancement initiatives. Employing a quasi-experimental design and a panel dataset from 31 Chinese provinces (2009–2020), this study uses the difference-in-differences approach to evaluate the impact of BDCPZ on the region's competitiveness. Our findings show that enhanced digital economy advancement significantly boosts the creation of new industries, such as the creative industry. This study advances understanding by linking economic development and the business environment and conducting a heterogeneity analysis to identify the most influential characteristics for new industry creation. These characteristics are categories that fall under regional ecosystems—including talent mobility, innovation culture, and financial institutions—and act as mediators of this relationship, offering valuable insights for stakeholders to enhance regional sustainable competitiveness and innovation.

Managerial relevance statement: This study offers valuable managerial insights for managers, policymakers, and industrial networks to apply in practice. By understanding the importance of regional talent mobility and strong innovation culture, managers in traditional engineering firms can experiment with novel strategies like rotational mobilizing programs to increase agility and diversify into creative sectors. Policymakers can support these efforts in three ways: by incentivizing digital economy advancements like automation, application of emerging technologies through tax breaks and grants; by establishing cross-sector innovation hubs where traditional industries collaborate with tech startups and creative enterprises; and by focusing on training and reskilling programs. Finally, industrial networks, i.e. consultancy networks drive strategy and collaboration, are encouraged to educate financial institutions on how to assess creative industry projects and facilitate talent mobility by linking traditional engineering firms with SMEs and startups to acquire valuable cross-sector experience, foster innovation, and contribute to the development of new industries.