Judicial digitalization and the digital innovation divide: evidence from internet courts in China

Whether digital public infrastructure can narrow the digital innovation divide between large incumbent firms and smaller, less resourced innovators remains an open question. We study this question using the staggered establishment of China’s Internet Courts as a quasi-natural experiment, which provide fully online proceedings for intellectual property (IP) disputes. Using difference-in-differences estimates with Chinese A-share listed firms covering 2014 to 2021, we find that Internet Courts significantly increase digital invention patent applications, with no significant effect on non-digital innovation or digital utility models. The effects are significantly larger for firms with weaker pre-treatment innovation capabilities and private firms. These results are consistent with a fixed-cost channel: fully online proceedings reduce the upfront costs of IP litigation, which disproportionately benefits smaller firms. We conclude that judicial digitalization, when designed as accessible public infrastructure, can narrow the digital innovation divide rather than widen it.