Digital Information Infrastructure and the Growth of Chinese SMEs: An Institutional Co-construction Approach

Abstract

Purpose: This study investigates how digital information infrastructure (DII) drives the growth and innovation of Chinese small and medium-sized enterprises (SMEs) through an institutional co-construction approach, examining the mechanisms by which information and communication technology enhances SMEs' participation in global value chains (GVCs).Design/Methodology/Approach: A dynamic panel model was employed for empirical analysis, exploring the relationship between DII adoption and SME performance indicators from 2020 to 2024. Structural equation modeling was utilized to analyze pathways through which the integration of informatization and industrialization affects value-added capabilities across different manufacturing value chain segments.Findings: Results demonstrate that DII significantly enhances SMEs' competitive positioning in GVCs through dual pathways: first, digital technologies optimize internal management and decision-making processes (path coefficient=0.65), facilitating product and service diversification; second, DII improves information transparency and reduces transaction costs (average reduction of 23.7%), strengthening supply chain collaboration. The highest combined effects were observed in marketing (47.7%) and quality control (40.6%) activities.Conclusion: The institutional co-construction of digital infrastructure and enterprise innovation creates a virtuous cycle that accelerates the transformation of the manufacturing sector, exhibiting a two-quarter lag before maximum benefits materialize and helping SMEs overcome resource constraints and low-end lock-in challenges.Practical Implications: These findings provide empirical support for policymakers to enhance targeted infrastructure development through technology adoption incentives, innovation vouchers, and digital ecosystem incubators that address the specific developmental stages and technological readiness of SMEs.