Digital Infrastructure and Export of SMEs: Evidence from China

This paper shows that digital infrastructure development improves SMEs' performance on the international market in China. Using a staggered Difference-inDifferences (DID) design and data from SMEs listed on the A-share SME and ChiNext board (2009-2020), we find that the Broadband China policy significantly boosts SME exports. On average, SMEs located in the pilot cities enjoyed a 6.3% larger increase in export-to-revenue compared to those located elsewhere. Our results are robust to the use of new DID estimators, Goodman-Bacon (2021) decomposition, Propensity Score Matching (PSM), pre-trend analysis, placebo tests, and alternative samples. The impact of the policy varies with firm size, industry, and executive team composition. The Broadband China policy promotes digital transformation of SMEs, which facilitates export through enhanced direct market access, reduced transactional costs, and alleviated financial constraints. We also provide evidence that rules out improvements in productivity or imports as drivers of the observed export expansion.