Spatial agglomeration of information services industry and its evolution: Evidence from the Pearl River Delta, China

Abstract

The information services (IS) industry, which facilitates industrial transformation and upgrading, has emerged as a key driving force behind China's economic growth in recent years. More evidence can be accumulated from the Pearl River Delta (PRD), one of the largest transforming economies and IS gathering region in China. Firstly, this paper investigates the spatial patterns and dynamics of IS agglomeration in the PRD from 2003 to 2018, using the spatial autocorrelation analysis and Kernel density analysis. Secondly, a dynamic panel model with a system generalized method of moments (SYS-GMM) estimation is employed to identify the factors significantly influencing the industry agglomeration economy. Results show that: (1) Large firms continue to gather in the core area of major cities, while smaller firms show a more balanced distribution from the core to periphery regions. The spatial proximity of firms proves that micro firms benefit less from industrial agglomeration compared to larger ones. (2) The effects of agglomeration externalities on economic growth remains positive, with labor force and commuting costs playing a vital role in the expansion of the IS industry. By integrating geo-spatial information and empirical evidence, this study contributes to China's understanding and experience as a late-developing country in the digital economy era. Finally, policies supporting small and medium enterprises (SMEs), improving the effectiveness of government subsidies, and strengthening industry-university research cooperation are proposed.