Endowing urban business environments with an intelligent brain: empirical evidence from cities in western China

As globalization advances, establishing a fair, efficient, and convenient business environment is vital to enhancing international competitiveness. Smart city development, as a new urban innovation model, drives digital transformation. It also improves market conditions, and speeds up urban reforms. Therefore, it is particularly important to examine how less developed regions can utilize smart city policy (SCP) to improve their business environment. This study is grounded in institutional theory, information economics, and the theory of competitive advantage. Using panel data from 82 cities in western China spanning 2006 to 2021, it treats SCP as a quasi-natural experiment and applies a multi-period difference-in-differences model. The research examines the link between smart city development and regional business environments, while also exploring the underlying mechanisms. The findings reveal that SCP have significantly improved the business environment in western China, which remains robust even after a series of robustness tests. The effects of SCP are particularly pronounced in megacities and in cities with higher levels of human capital, stronger financial support, and more advanced digital infrastructure. Moreover, SCP fosters a market-oriented, internationalized, and law-governed business environment, while Fintech further amplifies this positive impact. Additionally, SCP exhibits a significant spillover effect. These findings offer valuable insights for policymakers seeking to enhance the business environment in less developed regions.