The digital economy is widely recognized as a key driver of urban innovation, transforming production modes and creating new innovation elements. Therefore, understanding how the digital economy affects urban innovation and its underlying mechanisms is essential. Using data from 284 Chinese cities (2011 to 2022), this study examines the digital economy's impact on urban innovation and identifies its mechanisms. Regression analysis reveals that the digital economy significantly enhances urban innovation by boosting entrepreneurship, attracting innovative talent, and promoting FinTech development. The results remain robust after multiple robustness tests and endogeneity analysis. Spatial heterogeneity analysis reveals stronger innovation-driven effects in central and eastern cities, those with better institutional environments, and higher intellectual property protection levels. To enhance urban innovation capacity, the government should strengthen digital infrastructure, improve institutional frameworks and legal systems, implement tailored regional innovation policies, promote cross-regional cooperation, and bridge the digital divide for sustainable growth.
Chen et al. (Wed,) studied this question.