Abstract: As the core engine of China's modern industrial system, digital technology provides endogenous momentum for high-quality economic growth by driving innovation within the circulation sector. Using provincial panel data from 2012 to 2023, this study empirically investigates the impact of digital technology on the sector's innovative capacity. The findings confirm a significant positive effect, which displays marked spatial heterogeneity: central-region dominance, diminishing marginal returns in the East, and latent potential in the West. Threshold effect tests reveal an inverted U-shaped dynamic in human capital accumulation, shifting from increasing to decreasing returns. Additionally, industrial upgrading must surpass a composite technology-institution threshold to generate positive feedback, while innovation output follows a two-stage acceleration pattern of gradual accumulation culminating in abrupt leaps. Spatial analysis further indicates that digital technology is reshaping the economic geography of the circulation sector, driving a transition from agglomeration toward regional equilibrium. However, the simultaneous presence of inter-regional siphon and demonstration effects underscores a persistent tension between spatial synergy and competition.
