Regional Digital Economy Development and Enterprise Productivity: A Study of the Chinese Yangtze River Delta

Can the development of the regional digital economy improve the productivity of enterprises and thus contribute to the enhancement of the local economy? To address this question, we employ listed companies operating in the Yangtze River Delta of China from 2007 to 2017 as a case study. The digital economy here refers to the comprehensive combination of digital industrialization and industrial digitalization. First, we find that the development of the regional digital economy has a significant positive effect on the productivity of enterprises. Second, there are three possible paths to improve enterprise productivity: management cost upgrading, capacity of innovation upgrading, and factor input structure upgrading. The empirical results reveal that management cost upgrading suppresses the development of the regional digital economy, that is, the lagged indirect effects of innovation activities or the increased labour costs required by innovation activities crowd out capital from factor inputs. However, if these management costs can be significantly reduced, the development of the regional digital economy increases enterprise productivity.