Can government digitalization promote firm productivity? Evidence from Chinese listed firms

Abstract

ABSTRACT In the digital era of governance, few studies have analysed the influence of digital government on micro economies. To fill this gap, we explore the nexus between digital government and firm total factor productivity (TFP), and uncover the potential transmission channels behind this connection by focusing on Chinese listed firms from 2010 to 2017 and utilizing panel regression with firm-, year-, and province-fixed effects. Our findings confirm that digital government has constructive effects on firm TFP. Furthermore, empirical results suggest that this favourable impact can be transmitted through three channels of firm transaction costs and innovation, digital infrastructure construction, and government-market relationships. Further analysis reveals that the beneficial effect of digital government on firms is more significant in provinces with low fiscal transparency and complex topography, indicating that digital government compensates for the disadvantages of low fiscal transparency and inconvenience of steep terrain. Based on these conclusions, we provide suggestions for government digitalization to improve the performance of government-microeconomic complementation.