How the Rural Digital Economy Drives Innovation and Entrepreneurship in China’s Countryside

What is it about?

This study examines how the rural digital economy—captured as both hardware (digital infrastructure) and software (use of digital services)—promotes rural industrial revitalization. Focusing on a representative navel orange production area in China, the research analyzes 1,042 structured survey responses to assess how digitalization shapes three outcomes at the household level: farmers’ innovation intentions, entrepreneurial actions, and perceived outcomes. Methodologically, the paper estimates Ordered Probit and OLS models and then addresses endogeneity using instrumental variables; standard tests confirm instrument relevance and validity. By disaggregating effects across business models and farm sizes, the study identifies who benefits most from digital transformation. The empirical results show that both infrastructure and service usage significantly enhance innovation intentions, spur entrepreneurial engagement, and improve perceived outcomes; these effects remain statistically robust—and in several cases strengthen—after accounting for endogeneity. A consistent pattern of heterogeneity emerges: while hardware exerts limited differences across business types, software-oriented adoption (e.g., e-commerce platforms, mobile extension, digital payments, and traceability systems) confers broad advantages. Impacts on entrepreneurial action and outcomes are more pronounced among medium- and large-scale farms than among smaller producers. Mechanism analysis indicates that improvements in employment, income growth, and perceived well-being mediate the relationship between digital development and revitalization outcomes. Altogether, the study clarifies the pathways through which digital inclusion catalyzes localized innovation and industrial upgrading in rural economies and provides evidence on where policy levers—infrastructure gaps versus service uptake barriers—matter most.

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Photo by Quang Huy Nguyễn on Unsplash

Photo by Quang Huy Nguyễn on Unsplash

Why is it important?

Industrial revitalization is central to high-quality rural development, yet many localities face tight budgets and uneven capacity to adopt new technologies. By quantifying the separate roles of infrastructure and service usage, this study helps decision makers prioritize what to fund first and how to sequence interventions. The finding that software adoption delivers widespread benefits—while farm-size heterogeneity persists—implies that closing usage gaps (skills, onboarding, trusted intermediaries) can yield faster returns than hardware alone. Robustness to endogeneity increases confidence that observed gains are not spurious, supporting the case for scaling inclusive digital services such as training, platform access, and advisory tools. The mediation evidence (employment, income, well-being) shows that digitalization does more than raise intentions: it translates into entrepreneurial actions and better livelihood perceptions, strengthening local value chains and market links. For practitioners, the results highlight where targeted support is most needed—medium and large farms respond strongly, while smallholders may require tailored enablement to fully capture benefits. For researchers and planners, the study offers a replicable measurement framework for specialty-crop regions and a baseline for tracking how digital inclusion affects rural industrial upgrading over time.

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