Digital technological innovation, economic agglomeration, and digital business environment: Spatial effects and mechanisms based on Institutional Logic Theory

Accelerating the shift from traditional to digital business environments is critical for nations aiming to capture development opportunities and strengthen global competitiveness. In this context, digital technological innovation serves as a key driver of digital business environment optimization. Grounded in institutional logic theory, this study examines the underlying mechanism linking digital technological innovation to the digital business environment through the lens of economic agglomeration. It empirically investigates both the direct and spatial effects of digital technological innovation, with a particular focus on the mediating and nonlinear moderating roles of economic agglomeration. Empirical results show that although the digital business environment has improved nationally on an annual basis, significant regional disparities remain, with eastern regions exhibiting higher levels of development. Digital technological innovation has a significantly positive effect on the digital business environment, a finding robust to multiple specification checks. Furthermore, digital technological innovation not only enhances the local digital business environment but also generates positive spillovers to neighboring regions. Economic agglomeration plays a dual role in this process, acting as a positive mediator and a negative moderator. The effect of digital technological innovation also varies across cities of different sizes and administrative tiers. This study provides empirical evidence on the relationship between digital technological innovation and the digital business environment, highlighting the complex and nonlinear societal implications of digital technological innovation. • Digital business environment has improved annually, yet regional disparities remain. • Digital technological innovation positively affects digital business environment. • Digital technological innovation generates positive spatial spillover effects. • Economic agglomeration acts as dual mediator and negative moderator.