Digitalization and innovation: How does the digital economy drive technology transfer in China?

The launch of China's National E-commerce Demonstration Cities (NEDC) has significantly contributed to a dynamic e-commerce sector, spurring the digital economy. While existing studies have examined the digital economy's impact on technological and environmental innovation, our research extends this by exploring its influence on technology transfer. We employ the staggered difference-in-differences methodology to delineate a pronounced and favorable influence of the digital economy in driving various dimensions of technology transfer, such as strength, in-strength, out-strength, degree, indegree, and outdegree. Our analysis indicates that the digital economy notably drives technology transfer via two key methods: upgrading industrial structure and promoting the factor market. Delving further, we identify diverse impacts influenced by institutional distance, geographical closeness, and high-tech IPC classifications. These observations provide a fresh understanding of how the digital economy influences technology transfer. •Does digital economy matter for city-level technology transfer?•We estimate this at both inward and outward directions of technology transfer.•Both industrial structure and factor market are plausible mechanisms to promote it.•The geographical closeness effects are substantial and span well beyond 1000 km.•Non-high-tech sectors exhibit greater responsiveness relative to high-tech sectors.