How does digital technology administrative penalty affect big data technology innovation: evidence from China

Administrative regulation is an essential institutional arrangement for governing innovation in big data technology. Administrative penalties are one of its main methods. It is worth investigating whether administrative penalties can serve as an institutional safeguard to promote technological innovation. This study collects data on digital technology administrative penalty (DTAP) and big data technology innovation (BDTI) from 2008 to 2020 in 281 cities in China and empirically evaluates the impact and mechanism of DTAP on BDTI. The findings suggest that the normative impact of the DTAP system can foster a conducive business ecosystem for big data innovation. The incentive mechanism motivates firms to increase their long-term investment in technological innovation, while the deterrence mechanism ensures the existence of a regulated competitive market. These mechanisms play a crucial role in facilitating BDTI. Mechanism tests show that the DTAP has the potential to promote novel business models in the digital economy and accelerate progress in industrial digitalisation, which in turn promotes innovation in big data technologies. The impact of the DTAP on promoting BDTI is diverse, with a significantly greater impact in the first-tier cities. DTAP plays a more important role in fostering BDTI in places where the digital factor-driven industry is still in its early stages of development.