Digital Industry Agglomeration and Export Product Diversification: Evidence from Chinese Firms

Abstract

The rapid development of digital industries such as artificial intelligence and big data has fundamentally transformed production, providing new opportunities for the diversification of firms. Drawing on data from the China Customs Database and the Annual Survey of Industrial Firms for 2003–2013, we employed a panel fixed effects model to examine the impact of digital industry agglomeration on firms' export product diversification. The findings revealed that, holding other conditions constant, a one-unit increase in digital industry agglomeration resulted in a significant 2.34 percent rise in export scope and a significant decrease by 0.58 percent in export concentration. Firms in digitally advanced cities and capital-intensive industries were more influenced by digital industry agglomeration in export diversification. Mechanism analysis reveals that digital industry agglomeration fostered export product diversification through innovation stimulation, information dissemination, and efficiency enhancement. Innovation was evidenced by increases in urban innovation indices and the emergence of new export products. Information dissemination boosted wholesale and retail sales, helping firms to expand export destinations. Efficiency enhancement was reflected in narrowing management efficiency gaps among firms.