The impact of broadband speed on innovation: City-level evidence from China

Previous studies have associated broadband with innovation, but most of them have focused on broadband access or broadband penetration rate rather than broadband speed. However, with the increase in the global broadband penetration rate, network speed is becoming a more important aspect of broadband development. Using a fixed effect model based on panel data from 274 cities in China from 2016 to 2018, we explore the impact of broadband speed on innovation and further validate the relationship by instrumental variable estimation and a series of robustness tests. The main findings are as follows: First, broadband speed significantly promotes patenting, and this effect is greater than the increase in broadband penetration rate. Second, the impact of broadband speed on promoting innovation is more substantial in cities with higher Internet penetration, GDP per capita, science and technology investment, and foreign direct investment. Third, broadband speed could promote innovation by facilitating patenting cooperation among firms. Fourth, we find no evidence of a diminishing marginal effect of broadband speed in this setting. This study has significant practical implications for emerging countries to encourage innovation by increasing broadband speed.