Does telecommunications infrastructure promote entrepreneurship in developing countries? Evidence from a quasi-natural experiment in China

Abstract

As an essential element of the entrepreneurial ecosystem, telecommunications infrastructure could effectively stimulate entrepreneurial activity. Based on prefectural city data from 2003 to 2019, this study constructs a time-varying difference-in-differences model (DID) to identify the impact of telecommunications infrastructure on entrepreneurship by adopting the Broadband China strategy as a quasi-natural experiment. Several heterogeneity analyses are further conducted under different city characteristics. The potential transmission channels from the perspective of resource misallocation are also explored. The results show that telecommunications infrastructure significantly promotes entrepreneurship in China, but there is a time lag effect. The positive impact of telecommunications infrastructure on entrepreneurship is more pronounced in the midwestern regions, small-medium scales, and cities with underdeveloped traditional infrastructure. Alleviating capital and labor misallocation are potential channels for telecommunications infrastructure to promote entrepreneurship. These findings provide evidence for building telecommunications infrastructure rationally to facilitate entrepreneurship and reduce the imbalance of regional entrepreneurship.