Network infrastructure construction and firm’s digital technology innovation: evidence from Broadband China strategy

What the paper says

Purpose As the crucial foundation of the digital economy, network infrastructure construction is being enthusiastically promoted by governments. While existing literature addresses the impacts of network infrastructure, it often overlooks its role in supporting digital technology innovation. This study aims to fill this gap. Design/methodology/approach This study employs a quasi-natural experiment of the Broadband China strategy and a difference-in-differences model to empirically investigate the effect of network infrastructure construction on firms’ digital technology innovation. It measures digital technology innovation by applying text analysis to patent application data. Findings This study finds that network infrastructure construction significantly improves digital technology innovation. This finding remains robust across various checks. The mechanism analysis reveals that network infrastructure increases firms’ attention to digital development, promotes collaborative innovation and reduces transaction costs, thereby fostering digital technology innovation. Moreover, the effect is more pronounced for firms in high-tier cities, larger firms, state-owned firms and high-tech firms. Originality/value This study provides policy implications for government infrastructure initiatives and insights for firms navigating digital innovation in the context of rapidly developing network infrastructure.