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Diffusion or polarization: the spatial spillover of digitalization on urban innovation

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  • Zhuoya Du

    (Jilin University)

  • Qian Wang

    (Jilin University)

Abstract

Digitalization is reshaping the innovation ecosystem. Existing literatures focus on the promotion of digitalization on urban innovation, while neglecting the cross-regional network properties of digitalization that induces spatial polarization. This paper examines the spatial spillover effect of digitalization on innovation and the spatial moderating effect of the two types of financial development. The results of the spatial Durbin models, using the panel data of 279 cities in China from 2011 to 2019, show that digitalization causes innovation polarization among Chinese cities by promoting local innovation and depressing neighbor innovation by its negative spatial spillover effect. The development of banks and capital markets has further intensified the polarization of urban innovation in the process of digitalization. Heterogeneity analysis shows that the digital divide enlarges the backward advantages of the non-eastern regions in innovation. In the eastern regions, the development of capital market has a more positive local and spatial moderating effect, while the non-eastern regions are more vulnerable to the negative local and spatial moderating effect of the banking sector. Therefore, suppressing the polarization effects of digitalization is vital for avoiding the gap of urban innovation and the consequent economic development difference among cities.

Suggested Citation

  • Zhuoya Du & Qian Wang, 2025. "Diffusion or polarization: the spatial spillover of digitalization on urban innovation," The Annals of Regional Science, Springer;Western Regional Science Association, vol. 74(2), pages 1-33, June.
    • Handle: RePEc:spr:anresc:v:74:y:2025:i:2:d:10.1007_s00168-025-01395-1
    DOI: 10.1007/s00168-025-01395-1
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    JEL classification:

    • G11 - Financial Economics - - General Financial Markets - - - Portfolio Choice; Investment Decisions
    • G24 - Financial Economics - - Financial Institutions and Services - - - Investment Banking; Venture Capital; Brokerage

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