China & World Economy / 50–71, Vol. 26, No. 6, 2018

Does “Internet Plus” Promote New Export Space for Firms? Evidence from China

Xianhai Huang, Xueyin Song, Xinyue Hu*

Abstract

Based on data from the Chinese Industrial Enterprises Database, this paper investigates the effect of “Internet Plus” on the trade destination mix at the enterprise level. The analysis extends the classic dual margins to three dimensions: destination extensive, destination intensive and destination structural margins. The paper suggests that connecting to the internet not only raises Chinese firms’ propensity to export, but also extends the destination extensive margin. In addition, Internet Plus could create a synergistic effect for internet-enabled enterprises, that is, the development of the destination country’s internet access benefits domestic firms’ export participation. Finally, the paper finds that Internet Plus, rather than increasing the intensive or structural margins, leads to the transfer of exports to lower-middle-income countries and helps firms achieve competitiveness and thus increases their profit. The paper provides an explanatory mechanism and empirical evidence for firms’ use of the internet to optimize export space.