Artificial Intelligence Governance and Industrial Development: Transnational Spillovers, Technology Transfer, and Sustainable Territorial Implications in Brazil

Abstract

This study examines the relationship between artificial intelligence (AI) governance and industrial development, focusing on the transnational spillover effects of China’s regulatory framework on Brazil. Positioned at the intersection of technology governance, territorial development, and sustainability, the paper analyses how emerging AI regulatory models generate indirect impacts on partner economies through mechanisms of technology transfer, infrastructure complementarities, and regulatory alignment. Using a difference-in-differences (DiD) approach applied to panel data from 25 Brazilian industrial sectors (2019–2025), the findings indicate that sectors with higher exposure to AI experienced a significant increase in output following the formalization of China–Brazil AI cooperation. The results reveal that these effects are mediated by open-source technological ecosystems, increased investment in digital infrastructure, and reduced regulatory uncertainty, contributing to enhanced industrial performance and adaptive capacity. Beyond economic outcomes, the study highlights the territorial implications of AI governance, particularly in fostering more balanced regional development, strengthening innovation ecosystems, and supporting pathways toward sustainable and resilient industrial systems. The article contributes to the literature on AI governance and development by introducing the concept of transnational regulatory spillovers as a driver of sustainable territorial transformation, offering relevant insights for policymakers and stakeholders navigating the global dynamics of digital transition.