Does a smart business environment promote corporate investment? a case study of Hangzhou

Abstract

As a result of business environment reforms in China’s Hangzou, the cost of business has reduced, the confidence of Hangzhou enterprises has survived the COVID-19 outbreak, and foreign investment continues to increase. Nevertheless, Hangzhou’s business environment has shortcomings, such as insufficient technology, talent, and intelligent infrastructure. Two unresolved questions persist: (i) Has the smart business environment stimulated corporate investment by reducing system costs and boosting corporate confidence? (ii) How do the commercial climate’s shortcomings impact the relationship between the intelligent business environment and business costs/confidence? We examined the impact of a local smart business environment on the corporate investment scale in Hangzhou using factor analysis, cluster analysis, linear regression, and path analyses of data from 297 firm managers. Smart governance improved public administration, financing, and rule of law. The business environment promoted investment by increasing business confidence and decreasing institutional costs. Weak intelligent property protection and legal fairness hindered the positive influence of smart governance on business confidence and system costs. This is the first study combining business environment, smart city, and smart governance concepts to analyze the influence of local smart business environments on business confidence, institutional costs, and investment. Our conclusion on the limitation effect of intelligent business environment on enterprise investment attempts to inspire further research on the intersection of business environments and smart cities. The law of intelligent business environment attracting investment obtained in the context of China, the largest developing country with diversified economic development, is of great significance for other developing countries. Countries can attract investment and promote economic development through intelligent governance. Developing countries should construct smart service platforms, coordinate supervision of public credit, reduce financing constraint, construct a government under the rule of law, improve the quality of land management, and protect intellectual property rights.