Urban Integration and Firm Technological Complexity: Evidence from China's Urban Agglomerations

The clustering and collaborative development among cities, as a strategic measure concerning regional inclusivity and sustainable development, is both a current practice and a future trend, as evidenced by numerous successful cases worldwide. Scholarly research has extensively validated, from a macro-level perspective, its positive effects on social and economic aspects. However, relatively little research has examined its impact on the behavior of micro-level enterprises. To bridge this gap, this study leverages China's urban integration strategy as a natural experimental framework and employs a two-way fixed effects model to conduct an in-depth investigation. The empirical results indicate that coordinated urban agglomeration development significantly enhances the technological complexity of enterprises within the region. The primary mechanism underlying this relationship is that the urban integration strategy facilitates regional financial concentration, fosters industrial collaborative agglomeration, and advances firm specialization, thereby enhancing the innovation capacity of enterprises. Furthermore, the heterogeneity analysis indicates that the findings are particularly pronounced for core cities within urban clusters, cities with lower levels of industrial specialization, and those with higher levels of financial development. Additionally, the effects are more significant for firms that face fewer financing constraints and inherently possess strong innovation capabilities. These findings not only augment the existing research on the micro-level effects of urban cluster development but also provide valuable insights for local governments in crafting policies to further enhance the sustainable innovation capacity of enterprises.