Digital infrastructure expansion and carbon intensity of small enterprises: Evidence from China

Abstract

While the growth of digital infrastructure theoretically offers increased opportunities for enterprises, the policy implications may vary depending on the firm size. We utilize the pilot policy of the Broadband China Strategy as an exogenous shock for firms and adopt a unique dataset from the National Tax Survey to investigate the impact of digital infrastructure expansion on the carbon intensity of small enterprises. The results indicate that digital infrastructure expansion leads to a notable increase of 9.04% in small firm's carbon intensity. These results exhibit resilience, withstanding rigorous testing through various robustness checks. This increase is primarily attributed to two channels: the competition effect, which results in a decline in small firm's output, and the change in energy structure, which leads to an increase in small firm's carbon emissions. Heterogeneity analysis reveals a more pronounced increase for small enterprises located in regions with less stringent environmental regulations and in industries with higher degree of market concentration. Our conclusion suggests that the government should pay attention to the survival and development of small enterprises. This entails ensuring fair market competition on digital platforms and preventing the dominant enterprises from abusing their information advantages to jeopardize the interests of small enterprises.