The impact of government policy on enterprise digital transformation: evidence from China’s national civilized city award

Abstract

ABSTRACT The rapid development of the Chinese economy motivates China’s urban construction. This study investigates the influence of the government’s urban construction policy, named national civilized city award, on enterprise digital transformation. Based on a sample of Chinese listed companies from 2007 to 2021, we use a staggered difference-in-differences model and find a positive link between this policy implementation and enterprise digital transformation. Our results remain after a battery of robustness checks including parallel trend analysis, PSM-DID, entropy balancing method, lagging value of independent variables, and alternative measures for digital transformation. Furthermore, attracting high-quality talents, mitigating financial constraints, and increasing innovation outputs are three possible mechanisms. Cross-sectional results show that the positive relation is more pronounced in firms located in non-high-technological, higher competitive industries, and stronger legal environment regions. These findings suggest that the government can help facilitate the corporate digital transformation pace by proposing efficient policies. Overall, our study enriches the insights into the urban construction consequences in emerging markets.