Can urban low-carbon transitions promote enterprise digital transformation?

Abstract

To address the escalating environmental issues and foster the progress of green development, the Chinese government has initiated the low-carbon city pilot (LCCP) policy since 2010. Assessing the effects of this extensive and multifaceted environmental policy holds substantial theoretical and practical significance, particularly in terms of scrutinizing its impact on enterprise digital transformation (EDT). This study uses the LCCP as a quasi-natural experiment, utilizing the data obtained from Chinese listed companies spanning from 2007 to 2019, and empirically discovers that the LCCP can indeed stimulate enterprises to implement digital transformation strategies. After undergoing a series of robustness checks, including placebo tests and the instrumental variable method, the result obtained was still strongly supported. Heterogeneity tests reveal that the aforementioned conclusion is more typical for samples of non-state-owned and high-tech enterprises. A further mechanistic analysis indicates that the LCCP promotes EDT through two channels: encouraging enterprises to increase R&D expenditure and focusing on improving the resource allocation efficiency. This research, based on the empirical data obtained from China, enriches our understanding of the economic consequences of employing environmental regulations, and also offers valuable insights for other nations into formulating urban emission reduction measures to reap more policy benefits.