Impacts of Administrative Penalties for Digital Technology on AI Entrepreneurship: Evidence from China

Administrative penalties for digital technology (APDTs) may either deter entrepreneurship by raising compliance costs or promote it by reducing regulatory uncertainty. Using panel data for 282 Chinese cities from 2008 to 2023, we examine their effects on AI entrepreneurship. We find that stronger APDT intensity is associated with higher levels of AI entrepreneurship, with results remaining robust to instrumental-variable estimation and alternative specifications. Digital and non-digital technological innovation constitute important transmission channels. These findings highlight the signaling role of regulatory enforcement in supporting entrepreneurship in emerging digital markets.