Regional digital transformation: evidence from China’s intellectual property demonstration cities policy

This study investigates the impact of China’s Intellectual Property Demonstration Cities (IPDC) policy on industrial digital transformation, providing novel empirical evidence on the underexplored relationship between intellectual property rights (IPR) and urban digitalization. Utilizing city-industry-level multi-regional input-output (MRIO) tables, we construct an index of industrial digitalization inputs by aggregating digital inputs across industries within each city, weighted by industry output shares. This index serves as a proxy for regional digital transformation. Our findings indicate that the IPDC policy positively influences regional digital transformation by developing digital infrastructure and enhancing the quality and quantity of patents. These results remain robust across various tests. Additionally, we find that IPDC significantly boosts inputs from digital-enabling infrastructure industries, particularly in sectors with a high risk of data breaches and low R&D intensity. Furthermore, IPDC positively impacts digital inputs from local digital-enabling infrastructure and digital media, further supporting the digital-enabling infrastructure mechanism and also exhibiting a minor magnet effect of the policy. This study contributes significantly to literature on the role of IPR as a catalyst for digital transformation and offers practical insights for policymakers aiming to promote sustainable economic growth through effective digital strategies.