Digital industrial cluster policies: igniting corporate innovation in the digital age

This study investigates the impact of digital industrial cluster policies on firms’ innovation activities, with a focus on both the frequency and pioneerism of innovation. Utilizing a staggered difference-in-differences (DID) approach on a panel dataset of Chinese firms from 2010 to 2023, along with Double Debiased Machine Learning (DML) techniques utilizing Random Forest algorithms, we find that these government-led spatial policies significantly enhance firms’ innovation performance. Specifically, digital industrial clusters boost both the quantity of patent applications and the originality of technological outputs. Furthermore, we examine the moderating role of a firm’s data element utilization level. Our results reveal that firms with a higher capacity to leverage data benefit more from these cluster policies, suggesting that digital absorptive capacity is crucial for maximizing policy-induced innovation gains. This study contributes to the literature on innovation policy and spatial development by highlighting the synergistic effects of targeted industrial policies and firm-level digital capabilities in fostering innovation within digitally concentrated environments.