Compute resource flow networks and digital innovation: evidence from inter-city connectivity

This article examines how a city’s position in inter-city compute resource flow networks affects its digital innovation. Using cross-city Internet Data Centre (IDC) service links, we construct a city-level network and estimate how a city’s network centrality influences digital patent output. Two-way fixed effects and instrumental variable estimates show that more central cities, which bridge more compute supply and demand across regions, produce significantly more digital patents. Mechanism analysis identifies three channels: digital industrial agglomeration, digital economy development, and inter-city patent collaboration. The effect is heterogeneous across firms. External compute connectivity raises innovation for non-listed firms but turns weaker or negative for listed firms, whose larger internal resources substitute for external access. The findings support a policy shift from local infrastructure expansion towards stronger cross-regional compute-network connectivity.