Cross‐border E‐commerce Reform and Entrepreneurial Activity in Urban Services – Evidence from Chinese Service Industry Enterprise Registration Data

• Published date: 01 November 2024
• Author: Xin Gao,Shuo Kong
• Date: 01 November 2024
• DOI: http://doi.org/10.1111/cwe.12563

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

China & World Economy / 217–258, Vol. 32, No. 6, 2024 217

Cross-border E-commerce Reform and Entrepreneurial

Activity in Urban Services – Evidence from Chinese

Service Industry Enterprise Registration Data

Xin Gao, Shuo Kong*

Abstract

Cross-border e-commerce (CBEC) significantly stimulates foreign trade development and

the flow of goods and services. This study, using Chinese city-level data and a multiperiod

difference-in-differences model based on CBEC comprehensive pilot zones, explores the

impact of CBEC reform on urban service industry entrepreneurship. The results show

that CBEC reform increased entrepreneurial activity, and this is confirmed by robustness

tests. The mechanisms driving this effect include the attraction of foreign direct investment,

improved information infrastructure, and talent development. Regional analysis reveals

stronger effects in central, western, and noncoastal cities, and industry analysis highlights

public and consumer services. Spatial heterogeneity shows that the reform’s impact

diminished with distance from pilot zones, with potential inhibitory effects in remote areas.

This study demonstrates how CBEC reform can stimulate entrepreneurship and foster

economic growth.

Keywords: cross-border e-commerce comprehensive pilot zones, entrepreneurial activity

in the service industry, multiperiod difference-in-differences, spatial heterogeneity

JEL codes: F13, F14, O18, R11

I. Introduction

Entrepreneurship drives economic growth and employment. It plays an essential role in

the transformation of old and new drivers of growth, improving livelihoods, providing

equal opportunities, and facilitating social upward mobility.

In a broad sense, entrepreneurship refers to career creation but in a narrow sense

it specifically refers to the process of starting a business. It is the process by which

*Xin Gao (corresponding author), Associate Professor, School of International Trade and Economics, Anhui

University of Finance and Economics, China. Email: gaoxin@aufe.edu.cn; Shuo Kong, Postgraduate Student,

School of International Trade and Economics, Anhui University of Finance and Economics, China. Email:

18322663879@163.com. The authors are grateful for support from the National Natural Science Foundation

of China (No. 72341014). And the authors thank the anonymous reviewers for their valuable suggestions.

Xin Gao, Shuo Kong / 217–258, Vol. 32, No. 6, 2024

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

218

entrepreneurs and their partners optimize and integrate resources to generate greater

economic or social value. This process requires them to organize operations, manage

resources, and apply services, technologies, and tools for critical thinking and decision-

making. According to New Venture Creation, a classic textbook on entrepreneurship

education by Timmons and Spinelli (2007), entrepreneurship encompasses a mindset,

character, and talent, necessitating a holistic approach and effective leadership.

Entrepreneurship has many uncertainties and risks, and to achieve success, it requires

resources and the appropriate conditions but it also needs entrepreneurs to have

appropriate abilities and characteristics.

Entrepreneurship is a necessity stemming from the Chinese government’s emphasis

on technology, the implementation of the strategy to rejuvenate the country through

science and education, and an innovation-driven development strategy, and it is also

a strategic imperative for promoting high-quality economic development, increasing

employment, and strengthening national competitiveness (Zhang and Cai, 2022).

Since the implementation of the reform and opening-up policy, China has consistently

placed great importance on innovation and entrepreneurship, implementing a package

of policies favorable to entrepreneurship, resulting in a positive growth trend in

domestic entrepreneurial activities. The 14th Five-year Plan and the report of the 20th

Communist Party of China National Congress have also called for the stimulation of

mass entrepreneurship and innovation initiatives, adhering to the innovation-driven

development strategy, continuously optimizing the entrepreneurial environment,

upgrading entrepreneurial services, fostering a spirit of entrepreneurship among the

masses, and encouraging more people to engage in entrepreneurial activities. Research

findings indicated a substantial increase in enterprises established in China. Specifically,

China witnessed the registration of an additional 28.87 million enterprises, reflecting a

notable growth rate of 15.42 percent in comparison with the preceding year (Yan, 2021).

In the current economic landscape, the service industry has occupied a dominant

position. As the main driving force for China’s economic development, its contribution

to GDP is constantly increasing, and its development prospects are favorable in the long

term. With the in-depth development of trade globalization and the upgrading of digital

technologies, the service industry has become the strategic focus of the optimization and

upgrading of China’s industrial structure. It is not only an important measure to stabilize

growth and ensure employment but also the backbone force for promoting economic

growth and social development. To realize agricultural modernization and industrial

informatization, more employment opportunities need to be absorbed through the service

industry. Therefore, intensifying the development of the service industry is conducive to

achieving full employment and more environmentally friendly and sustainable growth.

©2024 Institute of World Economics and Politics, Chinese Academy of Social Sciences

Cross-border E-commerce Reform and Entrepreneurial Activity 219

Nowadays, the continuously developing service industry has increasingly become the

focus of development and the hotspot of cooperation among various countries. Cross-

border e-commerce (CBEC), as an emerging form of foreign trade, is a vital force in the

development of China’s foreign trade. It has injected new vitality into the development

of the service industry, facilitating the acceleration of building a powerful trading nation.

With burgeoning global trade, CBEC has demonstrated a robust and consistent

growth trajectory. According to customs statistics, CBEC imports and exports in

China reached RMB1.98 trillion in 2021, a growth of 15 percent over 2020, and a

nearly tenfold increase over five years.1 This indicates that CBEC has created new

opportunities for the development of foreign trade in China. With the further unleashing

of the potential of CBEC, will reforms, e.g., the construction of pilot zones enhance

entrepreneurial activities effectively in China’s urban service industry?

Research related to the main topic of this study primarily falls into three categories.

The first concerns the economic effects of CBEC and its reform policy. The economic

effects of CBEC have been characterized by a substantial reduction in intermediary links,

weakening of geographical distance effects, and widespread participation of vulnerable

groups (Guo et al., 2018; Ma et al., 2019). It can significantly reduce trade costs

(Lendle et al., 2016; Ju et al., 2020), lower and export risks (Ma and Hu, 2022), and

develop service trade (Zhu et al., 2020). Numerous scholars have investigated CBEC

comprehensive pilot zones as case studies. The establishment of CBEC comprehensive pilot

zones can significantly increase the labor income share of enterprises by easing financing

constraints and through an incentive effect (Xu et al., 2023), while also encouraging the

agglomeration of productive services (Liu et al., 2023) and export growth ( Ma and Guo,

2022). The establishment of the China (Hangzhou) CBEC comprehensive pilot zone

has significantly stimulated regional economic and trade growth and industrial structural

upgrading (Wang and Rui, 2022).

The second category of research is related to urban entrepreneurial activity. The

literature in this category explores the factors influencing urban entrepreneurial activity,

primarily including innovation-driven policy (Bai et al., 2022), national pilot policy of

information benefiting the people (He et al., 2024), pilot free trade zone establishment

(Liu et al., 2022), digital finance (Li and Meng, 2022), national big data comprehensive

pilot zone(Zhi and Lu, 2023), immigrant populations (Ye et al., 2018), ecosystem

for doing business (Du et al., 2020), institutional environment (Lu and Tao, 2010),

commercial system reform (Huang et al., 2020), and so on. Based on service industry

entrepreneurship, the opening up of the Chinese service industry market significantly

1The data source is available from: https://news.cctv.com/2022/01/14/ARTI8ldjrKsrHkJlRfJAd0SG220114.

shtml (in Chinese).