Digital dividend or divide: The digital economy and urban entrepreneurial activity

The integration of the digital economy into various economic and social sectors is profoundly impacting urban entrepreneurial development. This study delves into the empirical analysis of how the digital economy influences entrepreneurial activities and the resulting gaps across cities. To achieve this, panel data from Chinese cities between 2011 and 2020, coupled with statistical information about registered enterprises in China's industrial and commercial sectors, are employed. Additionally, the study examines emerging digital risks and suggests corrective measures stemming from the rapid digital economic expansion. The findings of this research reveal that the digital economy fosters increased entrepreneurial activity within cities while simultaneously widening the gap in such activity across different urban areas—a phenomenon akin to the “Matthew effect.” Importantly, these conclusions withstand rigorous testing for endogeneity and robustness. In response to digitalization risks, establishing a robust intellectual property protection system emerges as an effective countermeasure. The government's role is pivotal: it should expedite urban digitization by prioritizing new infrastructure development and fostering a conducive business environment. Furthermore, it must remain vigilant to the potential exacerbation of the “Matthew effect” and regional developmental imbalances prompted by the digital economy.