Digital Economy and Urban Innovation Ability: From the Spatial Nonlinear Perspective

Abstract

Using the panel data of China’s 286 prefecture-level cities from 2011 to 2019, this paper explores the causal relationship between digital economy and urban innovation ability by panel vector auto-regression (PVAR), examines the spatial and dynamic effects of digital economy on urban innovation ability by spatial dynamic panel Durbin (SDPD) model, and studies the nonlinear effects of digital economy on urban innovation ability under different external environments using threshold spatial dynamic panel (TSDP) model. The results show that: (a) The urban innovation ability has significant spatial dependence and presents a U-shaped evolution trend. (b) In the short term, the digital economy has a positive impact on urban innovation ability, both directly and indirectly; in the long term, only the indirect effect of the digital economy remains significantly positive. (c) In different external environments, the impact of digital economy on urban innovation ability is nonlinear and has significant external environmental threshold characteristics. Specifically, the digital economy is more conducive to the improvement of urban innovation ability with a moderate degree of marketization; the effect of digital economy empowering urban innovation ability is better in a good legal environment or technological environment.