Data Regulation and Data-Based Innovation in China: A Four-Group Game Model Using Empirical Testing

The research problem: This research identifies the hindering effect of industry monopolies and insufficient regulation on China's data asset market. We underscore the necessity for a robust, market-driven data-allocation mechanism to foster the country's digital economy and high-quality development. Motivation: The principal aim of this study is to analyze the catalytic role of government regulations and innovation subsidies in spurring innovation within digital firms, a crucial element in China's push for modernization and high-quality development. The investigation targets digital companies affected by regulatory measures, government institutions responsible for policy development, and policy makers and economists with vested interests in the digital economy and innovation. Adopted methodology: The study utilizes an evolutionary game analysis and fixed-effects regression, deploying a complex evolutionary game model to scrutinize innovation strategies amongst key industry players. The analysis is grounded in empirical data from key Chinese industry sectors over the past decade. Analyses: The findings reveal that government-led data regulation and subsidies, along with firms' cybersecurity measures, are instrumental in facilitating innovation. However, innovation costs and penalties stifle this progress. These insights provide actionable policy recommendations designed to invigorate digital innovation and propel economic advancement.