Institutional openness and city cross-border e-commerce: Evidence from China's pilot free trade zones

Abstract

Institutional openness is crucial for advancing cross-border e-commerce (CBE). While existing literature examines the micro-level factors influencing CBE development, the impact of institutional openness on CBE remains insufficiently explored. This study focuses on China's Pilot Free Trade Zones (PFTZs), a critical initiative for promoting institutional openness, and investigates their effects on CBE development across Chinese cities. The findings indicate that institutional openness has significantly fostered the rapid growth of CBE in these cities. Critical pathways for this growth include external and internal openness measures. Furthermore, institutional openness has not yet exerted substantial radiation or siphoning effects on CBE in neighboring cities. Heterogeneity analysis suggests that institutional openness can further enhance CBE development in cities with weaker informal institutions, lower administrative levels, underdeveloped digital economies, and non-participation in the Belt and Road Initiative (BRI). This study provides a theoretical foundation and policy recommendations for expediting institutional openness and promoting the growth of CBE.