This paper used the entropy method to measure the comprehensive level of China’s urban regional digital economy development and measured the transformation and upgrading of industrial structures from both quantitative and qualitative dimensions. Based on the panel data of 271 prefecture-level cities in China from 2011 to 2018, this paper investigated the impact and transmission mechanisms of digital economy development on the transformation and upgrading of industrial structures through a fixed effects model, mediating effect model, and threshold regression model. The results show the following: First, the development of the digital economy has a significant positive role in promoting the quantity and quality of the upgrading of industrial structures, and has a stronger explanatory power for the quality of the upgrading of industrial structures. Second, the mechanism analysis shows that the digital economy can accelerate the transformation and upgrading of industrial structures by stimulating the level of regional innovation. Third, the analysis of the threshold regression model shows that the impact of the digital economy on the upgrading of industrial structures has nonlinear characteristics. Fourth, the impact of the digital economy on the upgrading of industrial structures has regional heterogeneity. It has the greatest impact in the western region, followed by the central region and the eastern region.

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