How consumers’ digital engagement affects regional innovation capacity in China?

Digital technology has altered the geographic distribution of knowledge in regional innovation. Existing studies emphasize the role of firms in the digitalization and innovation nexus, whereas there is little evidence on the effect of consumers' digital engagement on innovation capacity. Using data of 211 cities from 2015 to 2018 in China, this study investigates whether and how consumers' digital engagement affects regional innovation capacity. Our empirical results show that cities with greater knowledge diffusion embedded in consumer digital engagement benefit more from increased regional innovation capacity. Further analyses show that cities with higher digital consumer participation have higher innovation output, more entrepreneurial activities, and increased financial access, boosting city-level knowledge generation and commercialization. Our findings also reveal that consumers’ digital engagement is more beneficial in relatively developing regions, including western, peripheral, and less innovative cities, thereby alleviating the concentration of innovation to some extent.