From diffusion to internalization: digital policy, data institutions and eco-environmental governance performance in China

Purpose This study aims to examine whether and under what conditions digital policy interventions are associated with stronger eco-environmental governance performance (EGP). Focusing on China’s National Big Data Comprehensive Pilot Zone (NBDCPZ) policy, it investigates how policy-induced digital-capacity expansion and data-governance conditions shape the spatial realization of governance returns, with particular attention to data openness, data circulation and their institutional complementarity in the shift from policy diffusion to local internalization. Design/methodology/approach This study uses panel data from 269 prefecture-level cities in China over the period 2009–2019 and exploits the staggered rollout of the NBDCPZ policy as a quasi-natural experiment. Treating the policy as an exogenous shock that strengthens local digital capacity and data-governance foundations, it combines a difference-in-differences approach with spatial econometric models – including the spatial Durbin model – to estimate both local effects and cross-city spillovers. The analysis further examines heterogeneity by level of informatization and by region and conducts interaction tests using public data openness and the presence of data trading platforms as proxies for local data institutions. Findings The NBDCPZ policy shock is positively associated with city-level eco-EGP and generates positive spillovers to economically proximate cities. Benefits are realized unevenly: cities with stronger informatization and favorable regional conditions absorb policy gains locally, while weaker areas rely more on external diffusion. The joint presence of public data openness and data circulation significantly strengthens the local direct effect of the policy shock, pointing to an institutional-complementarity mechanism. Overall, governance returns from digital policy are spatially differentiated: they diffuse across economically proximate cities but are absorbed and internalized only where local absorptive capacity and complementary data institutions are stronger. Originality/value This study offers a new way of understanding how digital policy reshapes eco- EGP across uneven institutional and spatial settings. It advances an institutionally conditioned perspective on digital governance by showing that data openness and data circulation shape the conversion of policy-induced digital capacity into stronger EGP through their complementarity rather than through isolated institutional effects. It moves beyond average policy effects to demonstrate that the governance returns of digital policy unfold through distinct spatial modes, ranging from diffusion-dependent gains under weaker local conditions to more internalized returns where absorptive capacity and complementary data institutions are stronger.