Connected inequality: AI-driven innovation diffusion and spatial boundaries in China

Artificial intelligence (AI) is reshaping the spatial distribution of regional innovation. Using panel data from 262 Chinese cities from 2008 to 2023, this study develops an asymmetric spatial transmission framework based on AI-specific technological attributes. Spatial econometric analyses show that AI improves local innovation and generates positive spillovers, but these effects decay with distance and remain concentrated within urban agglomerations. Mechanism tests show that AI promotes explicit knowledge recombination and diffusion while increasing demand for tacit complementary capabilities, which supports local innovation but constrains cross-regional transmission.