Digital Trade Policy and the Sustainable Upgrading of Urban Innovation Structure: Evidence from China’s Cross-Border E-Commerce Comprehensive Pilot Zones

Digital trade is reshaping innovation incentives in emerging economies, yet whether digital trade policy can promote a sustainable upgrading of urban innovation structure—one that shifts the composition of innovative activity toward higher quality while contributing to broader societal goals—remains unclear. Exploiting the staggered rollout of China’s Cross-Border E-Commerce (CBEC) Comprehensive Pilot Zones as a quasi-natural experiment, this study examines how the policy is associated with changes in urban innovation composition using city-level panel data from 2010 to 2023. We construct a patent-text-based proxy for the disruptive orientation of urban innovation using TF-IDF analysis of patent abstracts—a methodological approach that captures textual distinctiveness as a dimension of innovation quality—and validate it against invention-patent intensity and highly cited patents. Using both conventional two-way fixed-effects and modern heterogeneity-robust estimators, we find that CBEC pilot-zone adoption is associated with a higher disruptive-innovation proxy share and a lower share of low-quality (strategic) patenting. The estimated increase in the disruptive-innovation proxy share is about 1.3 percentage points, equivalent to 40.6% of the sample mean. The effect is stronger in cities with weaker business environments, consistent with an institutions-as-substitutes interpretation, and is amplified by pre-existing local government attention to digital trade. Exploratory channel tests point to entrepreneurship, digital payment, and digitization as intermediate outcomes that respond to the policy. These findings contribute to the literature on digital trade policy, innovation composition, and sustainable upgrading by showing that a policy-induced compositional reallocation—rather than a simple increase in patent volume—may support a more quality-oriented, inclusive, and potentially more sustainable pattern of urban innovation in emerging economies.