Can data elements enhance urban innovation? Evidence from China

Empowering urban innovation is particularly crucial in the new development paradigm. The capacity of data elements to drive urban innovation is a significant issue that warrants exploration. Based on the panel data of Chinese cities from 2011 to 2021, we empirically estimate the effect of data elements on urban innovation using a two-way fixed-effects panel model and analyze the influencing mechanism using a mediated-effects model. The study finds that data elements significantly enhance urban innovation capacity, and this conclusion remains valid after a series of rigorous tests for robustness. The results of the mechanism analysis indicate that data elements can boost urban innovation capacity by promoting the integration of manufacturing and service industries, increasing urban entrepreneurial activity, and enhancing urban digital finance. Heterogeneity analysis reveals that data elements have a more significant impact on enhancing the innovation capacity of cities in eastern China, high-level cities, and cities with high levels of science and education. The findings of this study provide valuable guidance for formulating policies aimed at promoting the data elements market and enhancing urban innovation vitality.