How Digital-Real Economy Integration Shapes Little Giant Recognitions across Chinese Cities

YANTONG GUO^1*OOI KOK LOANG²

• ¹Huanghe Jiaotong University, Zhengzhou, China
• ²Department of Finance, Faculty of Business and Economics,University of Malaya, Kuala lumpur, Malaysia

Digital transformation is often expected to enhance regional innovation, yet high digitalization does not necessarily translate into real-economy upgrading. This paper examines whether digital–real economy integration (DREI) increases Little Giant SME recognitions and whether such effects spill over across cities. Using a balanced panel of 276 Chinese cities from 2019–2023, DREI is constructed with a coupling–coordination index based on entropy-weighted digital and real-economy subindices. Two-way fixed-effects models and a Spatial Durbin Model are applied to distinguish local impacts from indirect spillovers. Channel regressions using credit depth and R&D intensity assess plausible mechanisms, and regime dependence is evaluated with a fiscal-capacity threshold specification. Measurement robustness is assessed using alternative DREI reconstructions. Results consistently show that higher DREI is associated with more Little Giant recognitions, with indirect spillovers accounting for a large share of the total effect. Credit deepening emerges as the most immediate channel, while short-run innovation mediation is weaker in this short panel. Threshold evidence indicates larger marginal gains in fiscally constrained cities, consistent with diminishing returns where fiscal capacity is higher. Policy implications point to diffusion-ready integration and a local implementation plus regional coordination approach, with greater marginal attention to fiscally constrained areas.