The Impact of Digital Government on Innovation: City-Level Evidence from China

This study investigates how digital government fosters technological innovation in emerging market economies, using China as a representative case. Motivated by the growing role of digital transformation in enhancing institutional quality and market efficiency, we employ the comprehensive e-government pilot policy launched in 2018 as a quasi-natural experiment. A difference-in-differences (DID) model based on city-level panel data is constructed to examine both the overall impact and the underlying mechanisms. The results show that the implementation of digital government significantly promotes urban technological innovation. Mechanism analysis further reveals that digital government enhances innovation primarily by expanding market demand and improving the business environment. The heterogeneity analysis indicates that these effects are stronger in eastern regions and in cities with higher preexisting innovation capacity. The findings highlight the importance of digital governance in driving technological upgrading and innovation-based urban development in emerging economies, offering new evidence for policy design in the context of digital transformation.