Round 1

Reviewer 1 Report

General

This article is well written and if the authors want to they could publish it as it is, although I think there are some significant improvements that could be made that would strengthen the article, make it easier to understand within conventional economic modelling and possibly provide a pathway to something that is more ground-breaking in the thinking.

The English is good, understandable, and for what I presume is a second language excellent. A natural English first language speaker (which I am) there will always be the opportunity to tidy up a couple of things, but these are just a “nice to have” and not necessary. The authors should be proud of the very high standard of their use of English in this draft. I have read many papers by natural English first language speakers where the English is not as proficient as in this paper. My congratulations to the authors.

 If I were reading the article as it is rather than acting as a peer reviewer, I would be rather frustrated by some of the background, the detailed hypotheses, the lack of explicit general assumptions and some of the boundaries in the comments.

 I recommend publishing this article with some tweaks, and my comments are intended to give the authors the chance to see if they want to include few additional sentences that I suspect would improve clarity and understanding as to how this article fits into more conventional economic modelling.

Digital Economy Definition

 This paper would benefit from adding a paragraph or so that defines what the authors mean by “Digital Economy”. Reading the paper and inferring back from the variables they use I think they may mean the “Digital Infrastructure Underpinning the Economy”. If this is the case, could they consider adding some variable that represents the terrabytes of data being transferred across servers within a region to the analysis if such a figure is easily obtainable.

 There is however an alternative definition that could see the Digital Industrial Economy as being some variant of Industry 4.0, that is where the Digital Infrastructure is in place and then various productivity enhancing technologies are applied over the top of it to step change the relationship between capital and labor embodied knowledge within the production possibility curve. For example, automated manufacture takes human knowledge and embodies it into designs and code that then replicates the item via new production technologies such as Additive Manufacture or advanced CAD / CAM  / CNC / process flow integration. This step changes productivity and results in all sorts of potential industrial transformations.

 If the authors want to comment on the Digital Industrial Economy, then this also has geo-spatial implications, as it has potential to change the underlying factors in Krugman type economic gravity calculations.

 Personally, I don’t think the full impact of the above can be treated in this paper, as there are many issues and aspects and maybe a proper treatment is a special issue if a journal, a conference or a book or two. Notwithstanding, I do think a few sentences showing the authors have considered the issues, and decided their paper is just dealing with step one, the digital infrastructure would be helpful. They could also use these comments as links towards options for future research.

The Indices

 Thank you to the authors. A nice idea and helpful concept. I am not convinced by some data components in each index, which is why I sense a tighter passage on defining the Digital Economy may help strengthen this.

 Also, is the inferred 7 year time period long enough to describe a “restructuring dynamic” and is the 2020 data distorted by Covid 19 (Section 3.3 Page 8)? Would an eleven-year period of 2009 – 2019 that removes the 2008 global financial event and 2020 Covid distortion be a better sampling period?

The Production Function

 At points it feels like the authors want to suggest digitization is an additional factor of production, and at times they seem to see its impact as being indirect through variables such as the quality of human resources, financial and investment flows.

 It may be helpful to add a paragraph as to how they see all of this integrated into both some form of Production Function (probably a variant of the Cobb Douglas one) and the alternative Solow and (the very different) Rostow growth models. The key issue here is that digital innovation enables a shift in the technological base and by extension the shape / extent of the production possibilities boundary.

 The authors also implicitly touch on the issue of “Embodied Technological Lumpiness” through their comments on “over investment” and the desire of international firms to embed low labor cost manufacturing into supply chains at a given level of technology.

For example, if a firm has just spent US$50 million on a new plant at technological state α that implies a stated ratio of Labour (L) and Capital (K) with L defined as being human capital trained an qualified to a certain level, that firm will not wish to scrap that investment to adopt a new technological state β where the mix of L and K is different and both the skills in L and technology in K are different. This switching decision  often requires the retooling of K capital and retraining of L labor with consequent financial costs and risks. Consequently, age of industrial equipment, accounting depreciation and other such items are important inputs into an equation that assesses the difference in “fully loaded” unit costs between production states α and β.

 Yet it could be argued that shifting from state α to state β is what industrial restructuring is all about on the assumption that the pattern of major industries is to be preserved, and that the restructuring is not to see the phased exit from some sectors and growth of others.

 Modelling this and the testing this is complex, and most likely not in the scope of this paper; but a sentence or two acknowledging the importance of the digital economy opening up a production function that can be expressed between different technological states may be worth a mention. In the practical world it is, arguably, hugely important to firm level decision making and to enabling public policy.

 There is a final twist, in that optimal unit costs within a given production state require optimal economies of scale, and in this the work of Kaldor may be of help, although I suspect that with the exception of a sentence saying that “production efficiencies are subject to obtaining optimal economies of scale” may be better left out of an article such as this to reduce complexity. Indeed, one could adopt the stance that this as an exogenous assumption to the overall model, thereby making an important and considerable simplification for the reader.

Measuring Value Added

 Do the authors use constant price data to assess the evolution of Value Added by industry through time? It would be helpful to make this point clear.

Financial Model

 I don’t understand the link between the digital economy (however defined) and “access to finance” from this paper, and I am not able to understand what causes what. Personally I would see “access to finance” as a variable constraint that is less related to digital infrastructure than it is to bank regulation, shadow bank availability, the overall vector of risk (and time) adjusted asset class returns and the relationship of this to the Wicksellian Natural Rate of Interest (Wicksell, 1898) as linked to the Marginal Efficiency of Capital (Keynes, 1936) [but not the current debate on the neutral rate of interest R* which is something different].

From the complexity of my sentence above I wonder if the authors might want to avoid these issues and perhaps reword some of their comments around access to finance to highlight this is a complex area where (i) industrial success does help financial flows into investment (it raises investor confidence) and (ii) benefits from introducing a digital economy are consequently indirect, so necessary capital flows to enable this may require additional no related policy actions to make them happen. The wording of the second paragraph on page 5 may be worth revisiting to make it a bit more “conditional” or just to add the ceteris paribus other things being equal assumption.

In this context, the sentence on page 12 just before Table 6 seems to be very important and perhaps an additional and earlier comment on the enabling nature of financial flows would be appropriate earlier in the paper. Could such a comment help give context to the existing text in the second paragraph on page 5?

Assumptions – The Other Things Being Equal “Ceteris Paribus”

 

The article reads well, but the more I delve into the logic the more my reading would have been aided by a series of high-level bounding assumptions. These should be explicit and would probably be most helpful if they come at the point when the authors start to introduce the indices. A paragraph at the start of section 3 on page 5 would be most helpful.

A Few Detailed Comments

Isas_it

 I am not convinced by the logic underpinning isas_it  - is this just labor or would it be better to look at the changing share of constant price industrial output for a defined region over stated Standard Industrial Classification headings as well.

Isah_it

 Should this be contrasted to national and international benchmark values to show how adopting digital infrastructure seemingly (other things being equal) changes the relative gap?

Point (3) Page 8 Para 3.2.3

 I do not understand this point or the dataset referred to. Do the authors define Digital Finance as being “Fintech” that is digitally delivered financial products; be it non-conventional secondary lenders or the Central Bank Digital Currency or things along these lines? Do the authors really mean access to digital shadow banking? Or do they mean access to digital credit scoring and automated bank risk weighting calculations? Additionally, how do they describe an causal link underpinning this paragraph?

Last Paragraph Of 5.1 on Page 13

 It feels like this paragraph should be split into two, with the split occurring between

…rationalization. and  The Digital

 “The Digital” feels like a fourth point, and it feels like it should be rewritten to make it clearer as to whether finance is an exogenous enabler of the whole process or if it is in some way endogenous to the framework the authors are constructing. To me I think the authors seem to switch between the two during the course of the article. It may be I am misreading this, but could a reword of this point help the clarity. Access to appropriate Risk Finance is a key variable for all industrial development.

 

 

 

 

Author Response

1. Digital Economy Definitions: This paper would benefit from adding a paragraph or so that defines what the authors mean by “Digital Economy”. Reading the paper and inferring back from the variables they use I think they may mean the “Digital Infrastructure Underpinning the Economy”. If this is the case, could they consider adding some variable that represents the terrabytes of data being transferred across servers within a region to the analysis if such a figure is easily obtainable.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we added the part “3.1. Definition of digital economy”, this section strictly defines the digital economy.

 

2. The Indices: Thank you to the authors. A nice idea and helpful concept. I am not convinced by some data components in each index, which is why I sense a tighter passage on defining the Digital Economy may help strengthen this.

Also, is the inferred 7 year time period long enough to describe a “restructuring dynamic” and is the 2020 data distorted by Covid 19 (Section 3.3 Page 8)? Would an eleven-year period of 2009 – 2019 that removes the 2008 global financial event and 2020 Covid distortion be a better sampling period?.

 

Response: Thanks to reviewer’s comments. Firstly, the data of the indices collected in this paper are all from the more authoritative official statistics, which are open to the public and ensure the reliability of the data to a certain extent.

Secondly, the digital economy is still a relatively new concept, and the government statistics on indices related to the digital economy started relatively late, so the data selected in this paper is a more complete data collection from 2013 to 2020, while the data of other years are more seriously missing.

Thirdly, we thank the reviewer for their valuable comments, which are very professional suggestions. We did consider global financial event and 2020 Covid distortion, however, this paper focuses on the dependent variable industrial restructuring influenced by the independent variable digital economy development, the first thing we want to make sure is that the sample data used to test the hypothesis is in accordance with the rules of statistics, this paper took 240 samples from 30 regions; in fact, events affecting the global economy will always occur and cannot be enumerated. Therefore, the authors are very willing to follow the reviewer’s suggestion to control the data collection period from 2009 - 2019 in future studies and to examine the global financial event and 2020 Covid distortion as independently as possible, which will also be very interesting and meaningful studies.

Thanks again to the reviewers for their professional comments.

 

3. The Production Function

It may be helpful to add a paragraph as to how they see all of this integrated into both some form of Production Function (probably a variant of the Cobb Douglas one) and the alternative Solow and (the very different) Rostow growth models. The key issue here is that digital innovation enables a shift in the technological base and by extension the shape / extent of the production possibilities boundary.

There is a final twist, in that optimal unit costs within a given production state require optimal economies of scale, and in this the work of Kaldor may be of help, although I suspect that with the exception of a sentence saying that “production efficiencies are subject to obtaining optimal economies of scale” may be better left out of an article such as this to reduce complexity. Indeed, one could adopt the stance that this as an exogenous assumption to the overall model, thereby making an important and considerable simplification for the reader.

Response: Thanks to reviewer’s comments. Following this suggestion, in the revised manuscript, we have added a paragraph to the first paragraph of Section “4.1. Measuring model” that integrates the relevant factors into the production function and is marked in red.

 

4. Measuring Value Added

Do the authors use constant price data to assess the evolution of Value Added by industry through time? It would be helpful to make this point clear.

 

Response: Thanks to reviewer’s comments. In the revised manuscript, in the Section “4.3. Data sources”, we claimed that this paper uses constant price data to assess the evolution of Value Added by industry through time and is marked in red.

 

5. Financial Model

 I don’t understand the link between the digital economy (however defined) and “access to finance” from this paper, and I am not able to understand what causes what. Personally I would see “access to finance” as a variable constraint that is less related to digital infrastructure than it is to bank regulation, shadow bank availability, the overall vector of risk (and time) adjusted asset class returns and the relationship of this to the Wicksellian Natural Rate of Interest (Wicksell, 1898) as linked to the Marginal Efficiency of Capital (Keynes, 1936) [but not the current debate on the neutral rate of interest R* which is something different].

 

Response: Thanks to reviewer’s comments. In the revised manuscript, in the penultimate paragraph of Section “3.3. Research hypothesis”, we re-explain the logical relationship between the digital economy and access to finance, and explain why; and noted that certain conditions are required to realize the digital economy to enhance the access to finance and to facilitate the flow of funds to the relevant industries, especially in terms of the indirect role of financial development to promote the digital economy to enhance the industrial restructuring supererogation. The rewritten content is marked in red.

 

6. Isas_it

I am not convinced by the logic underpinning  - is this just labor or would it be better to look at the changing share of constant price industrial output for a defined region over stated Standard Industrial Classification headings as well.

 

Response: Thanks to reviewer’s comments. Here we would like to further explain, industrial restructuring speed (isas) is a major factor in measuring changes in industrial restructuring. The speed of regional industrial restructuring is measured by a modified Lilien index. A modified Lilien index is very influential in calculating isas. Therefore, this article also adopts this method.

 

7. Should this be contrasted to national and international benchmark values to show how adopting digital infrastructure seemingly (other things being equal) changes the relative gap?

 

Response: Thanks to reviewer’s comments. In this paper, digital infrastructure is one of the three sub-indicators measuring the explanatory variable, digital economy development, which is a very important variable and the reviewer has made very valuable suggestions, so in future research we will follow the reviewer’s comments, conduct a comparison of national and international benchmark values, and examine whether digital infrastructure creates a gap.

 

8. I do not understand this point or the dataset referred to. Do the authors define Digital Finance as being “Fintech” that is digitally delivered financial products; be it non-conventional secondary lenders or the Central Bank Digital Currency or things along these lines? Do the authors really mean access to digital shadow banking? Or do they mean access to digital credit scoring and automated bank risk weighting calculations? Additionally, how do they describe an causal link underpinning this paragraph?

 

Response: Thanks to reviewer’s comments. In this paper, digital finance refers to the new generation of financial services combined with traditional financial services industry by means of Internet and information technology, mainly including Internet payment, mobile payment, online banking, financial services outsourcing and online loans, online insurance, online funds and other services. The digital finance referred to in this paper is essentially the process of digitization of the financial industry with the new generation of information technology as the core, and promotes the development of digital transformation in various fields. The Institute of Digital Finance of Peking University has constructed a study on three dimensions, including the breadth of digital finance coverage, the depth of digital finance usage and the degree of digitalization of inclusive finance. The Institute of Digital Finance of Peking University has constructed a digital finance index system to measure the level of digital finance development at the provincial level in China in three dimensions, and releases a report once a year. Therefore, this paper adopts the data from this report to measure the mediating variable Financial development (fina) in this paper. Also, we have added to that section and highlighted it in red in the text.

 

9. It feels like this paragraph should be split into two, with the split occurring between

…rationalization. and The Digital

“The Digital” feels like a fourth point, and it feels like it should be rewritten to make it clearer as to whether finance is an exogenous enabler of the whole process or if it is in some way endogenous to the framework the authors are constructing. To me I think the authors seem to switch between the two during the course of the article. It may be I am misreading this, but could a reword of this point help the clarity. Access to appropriate Risk Finance is a key variable for all industrial development.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have split this paragraph into two. In particular, it is important to explain to the reviewer that finance is an exogenous enabler of the whole process in this paper.

Author Response File: Author Response.docx

Reviewer 2 Report

This study constructed an improved measuring index system of digital economy covering digital infrastructure, digital industrialization, and industrial digitalization. The topic is interesting and valuable, yet my comments are as follows:

-        The structure of the abstract is not suitable. The abstract should be based on the following format: 1- What is the purpose? 2- Research question 3- methodology 4- validation 5- results 6- why are your results significant?

-        I suggest the authors separate the introduction and literature review sections.  Also, they should add some more related and recent papers related to the current study.

-        In the introduction section, the contributions and research questions should be added.

-        The authors used the entropy TOPSIS method, but they do not have any section for this method. Please add a new section for this method. Also, please mention recent developments of the MCDM, such as ordinal priority approach (OPA), robust opa, dea-opa, and its applications in your paper which are available on https://ordinalpriorityapproach.com/index.php?s=2-opa-papers.

-        Future directions and limitations of the study must be added in the last part of the paper.

-        Is there any reference that can support the results of your study? Please add supporting references.

Author Response

1. The structure of the abstract is not suitable. The abstract should be based on the following format: 1- What is the purpose? 2- Research question 3- methodology 4- validation 5- results 6- why are your results significant?

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have rewritten the abstract following the format proposed by the reviewer and highlighted it in red in the revised manuscript.

 

2. I suggest the authors separate the introduction and literature review sections. Also, they should add some more related and recent papers related to the current study.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have separated the introduction and literature review sections and further supplemented the Section “2. Literature Review” by adding some more related and recent papers related to the current study.

 

3. In the introduction section, the contributions and research questions should be added.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have added the contributions and research questions in the introduction section and highlighted it in red in the text.

 

4. The authors used the entropy TOPSIS method, but they do not have any section for this method. Please add a new section for this method. Also, please mention recent developments of the MCDM, such as ordinal priority approach (OPA), robust opa, dea-opa, and its applications in your paper which are available on https://ordinalpriorityapproach.com/index.php?s=2-opa-papers.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have added the related content of entropy TOPSIS method in Section “4.2.2. Core explanatory variable” and highlighted it in red in the text.

Meanwhile, following the reviewer’s suggestion, we have add the related content of recent developments of the MCDM refer to the website provided by the reviewer and highlighted it in red in the text.

 

5. Future directions and limitations of the study must be added in the last part of the paper.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have added the related content of future directions and limitations of the study in Section “6.3. Future directions and limitations” and highlighted it in red in the text.

 

6. Is there any reference that can support the results of your study? Please add supporting references.

 

Response: Thanks to reviewer’s comments. Following this suggestion, we have added the supporting references that can support the results of our study in Section “6.1. Conclusions” and highlighted it in red in the text.

Author Response File: Author Response.docx

Round 2

Reviewer 2 Report

The manuscript can be accepted in its current form.