How does the digital economy reshape the geographical patterns of manufacturing enterprises? Empirical evidence from China

Abstract The impact of the rapidly developing digital economy on the development of the manufacturing industry has received extensive attention from the academic community. However, there are still differences regarding the impact of the digital economy on the geographical pattern of manufacturing enterprises. Therefore, taking the level of manufacturing agglomeration as a proxy variable for the geographical pattern of manufacturing enterprises, the paper employs the spatial Durbin model to investigate the impact of the digital economy on manufacturing enterprises’ geographical patterns in the panel data of 279 Chinese prefecture-level cities over the period from 2011 to 2020. The empirical results indicate that the digital economy exerts a positive agglomeration effect and spatial spillover effect on manufacturing enterprises. The conclusions remain unchanged after a series of robustness tests. The heterogeneity analysis results indicate that the digital economy has a greater agglomeration effect on large-scale manufacturing enterprises compared to small-scale manufacturing enterprises; and compared to other regions, the digital economy exerts a larger direct agglomeration effect on manufacturing enterprises in the western region and a greater indirect agglomeration effect on enterprises in the central area. Also, there is a greater agglomeration effect on enterprises for the cities that have established high-tech zones than on those that have not. The further mechanism analysis shows that the digital economy improves the spatial agglomeration degree of manufacturing enterprises by increasing market potential optimizing resource allocation and leveraging economies of scale. This study provides a reference for governments, enterprises, and international organizations to cope with the spatial reconstruction of manufacturing enterprises in the digital age.