How digital government development drives corporate digital innovation: the new role of data network effects theory

Digital Government Development (DGD), a key aspect of modern governance, uses digital technologies and data to promote high-quality economic growth. Based on China’s 2018 big data management reform as a quasi-natural experiment, this study applies a difference-in-differences approach to investigate how DGD affects corporate digital innovation through data network effects. Results indicate that the reform increases the expected number of digital invention patents for a median firm in pilot cities from about 4 to approximately 4.46. DGD, as an external platform node, appears to drive innovation by mandating data network access, reducing R&D manipulation, mitigating information asymmetry, and accelerating digital transformation, aligning with a potential mediation pathway. The effect is stronger in state-owned enterprises, high-tech firms, growing firms, and regions with stricter data privacy protections. Further analysis shows that DGD-driven innovation boosts total factor productivity. By adopting a data network perspective, this study contributes theoretically and practically to understanding governmental transformation in the digital economy.