Network Infrastructure and the Development of Digital Enterprises

This paper investigates the impact of network infrastructure on digital entrepreneurship using panel data from 295 Chinese cities (2005—2020) and a multi-period difference-in-differences design, exploiting the rollout of the “Broadband China” strategy as a quasi-natural experiment. The policy increased the share of digital enterprises by 2.97 percentage points on average, indicating that better infrastructure fosters regional digital entrepreneurship. The effect is stronger for small and micro firms, and network improvements encouraged new entries even in markets dominated by large incumbents. Heterogeneity analysis shows greater effects in cities with more university students and in industries with higher digital intensity. Mechanism tests suggest that network infrastructure promotes digital entrepreneurship by enhancing coverage quality, enlarging digital markets, and lowering transaction costs.