Network externalities and their impact on economic performance in resource-based cities of China

Abstract

[Objective] The development of resource-based cities is trapped in a dilemma due to a singular industrial structure and a closed development model. Exploring the mechanism of impact of network externalities on the economic performance of these cities is of great significance for promoting their economic growth and sustainable development. [Methods] This study first elaborated on the mechanism of impact of urban network externalities on the economic performance of resource-based cities, then analyzed the characteristics of change of the Chinese urban network from 2001 to 2019, and finally established an econometric model to test the impact of agglomeration economic externalities and urban network externalities on the economic performance of both resource-based and non-resource-based cities. [Results] The findings are as follows: (1) The network embeddedness of resource-based cities in the national organizational network had increased significantly, but there was still a considerable gap compared to non-resource-based cities. Resource-based cities had relatively fewer connections with core cities in the network and were generally located on the periphery of the urban network. (2) Investment, innovation, and urban network externalities significantly promoted economic growth. Particularly in the early stages of network embeddedness, resource-based cities showed greater heterogeneity and benefit potential in leveraging urban network externalities compared to non-resource-based cities. However, agglomeration economic externalities did not have a significant impact on the economic growth of resource-based cities. (3) Innovation and investment had a significant positive moderating effect on the relationship between urban network externalities and economic growth, and urban network externalities also significantly enhanced the positive impact of innovation and investment on economic growth, aligning with the principle of interaction symmetry. [Conclusion] Actively integrating into broader regional urban networks and enhancing the investment attractiveness and innovation capacity of resource-based cities are key strategies for promoting the transformation and economic growth of these cities.

Keywords

• network externalities|agglomeration externalities|economic performance|degree centrality|resource-based cities|china