Study on the Influence Mechanism of Government Innovation Preference on the Development of Digital Economy

Abstract

In recent years, against the escalating global competition and the swift advancement of the digital economy, governments have increased their investment in innovation and adopted a series of policy measures to encourage and support the growth of the digital economy. As one of the key factors driving the development of the digital economy, government innovation preference has received widespread attention for its mechanism and impact effects. Based on the panel data of 270 cities in China from 2012 to 2022, the direct relationship between government innovation preference and the development of digital economy is firstly explored through the fixed effect model, and secondly, The study explores the indirect impact mechanism of government's innovation preference on the digital economy by employing a mediated effect model, with industrial structure upgrading and urban economic density serving as constraint variables. The research reveals that government's innovation preferences play a notable direct role in advancing the digital economy and can also indirectly foster its development through upgrading the industrial structure and enhancing urban economic density.