Transitioning to high-quality development: impact of AI pilot zones on digital technology innovation in China

Abstract

This study aims to examine whether the New Generation AI Innovation and Development Pilot Zones policy, launched by China in 2019, promotes corporate digital technology innovation and identifies the boundaries of its impact. This study integrates regional innovation system theory, information asymmetry theory, and dynamic capability theory. Using data from Chinese A-share companies from 2010 to 2024, we employ a staggered difference-in-differences model to examine the policy effects. Furthermore, through panel regression and heteroskedasticity tests, we observe how the policy effect varies across different firm characteristics. Finally, we examine the boundaries of the policy effect across firms with different financing constraints and dynamic capabilities. First, the policy enhances corporate digital technology innovation. Second, the policy exhibits a certain degree of inclusiveness, with its impacts benefiting small- and medium-sized enterprises, non-high-tech companies, and firms in central and western regions, and it generates spillover effects. Third, the policy effect is weakened by firms' financing constraints. For firms under high financing constraints, engagement in AI strategic management can effectively mitigate the negative impact of financing constraints, and AI capital stock can also alleviate this negative impact to a certain extent. Finally, the policy-driven innovation improves corporate future sales and carbon productivity. First, this research identifies the policy's primary beneficiaries and the varying responses of firms to the policy. It thereby clarifies the firm-level boundaries required for the policy to convert into innovation output. Second, if the government can supplement with appropriate financial support and encourage firms to engage in low-cost strategic communication and to accumulate appropriate capital, it may help enhance the policy's conversion efficiency.