Functional industrial policy effects of the Belt and Road Initiative: evidence from digital innovation

This paper investigates the impact of the Belt and Road Initiative on the digital innovation of China’s A-share listed companies, drawing upon the theoretical framework of functional industrial policy. The results indicate that the implementation of the Belt and Road Initiative effectively enhances the level of firms’ digital innovation. The underlying mechanisms are identified as the alleviation of financing constraints and the enhancement of ESG performance. Heterogeneity analysis further demonstrates that the positive impact is more pronounced among state-owned enterprises, firms in key-involved industries, large-scale firms, and those operating in capital-intensive sectors. Further research suggests that the Belt and Road Initiative primarily influences open digital innovation. This study advances the understanding of the effects of functional industrial policies, while offering meaningful insights for firm-level digital innovation.