Does Digital Infrastructure Promote the Upgrading of Manufacturing Enterprises? Evidence From China

Abstract

The manufacturing industry (MI) in China has long been constrained by low-end lock-in. Digital infrastructure, as a solid foundation of the digital economy, has played an increasingly crucial role in economic growth as the digital transformation of global society accelerates. This raises an important question: Can the rapid development of digital infrastructure promote the upgrading of manufacturing enterprises (UME)? To investigate this, we selected manufacturing enterprises listed on the Shanghai and Shenzhen stock exchanges from 2004 to 2020 to empirically analyze the impact and mechanisms of digital infrastructure on UME. We find that digital infrastructure indeed significantly promotes enterprise upgrading. A heterogeneity analysis further reveals that this influence is more pronounced fro small-scale and low-tech manufacturing enterprises relative to large-scale or high-tech enterprises, and that it digital infrastructure contributes more to UME in underdeveloped rather than developed regions. Our mechanism analysis indicates that digital infrastructure supports UME by enhancing resource allocation efficiency and fostering technological innovation. These findings may have significant implications for developing countries, pointing toward a necessity for strengthening digital infrastructure and deepening its integration with the manufacturing sector. In particular, underdeveloped regions and small-scale, low-tech manufacturing enterprises should prioritize using digital infrastructure to advance the modernization of traditional manufacturing operations.