Technology-intensive Firms Research Articles

The impact of digital transformation on firm performance

PurposeDigital transformation (DT) is a high-risk, long-term and systematic organizational change, which is highly dependent on the level of operation management. According to the resource-based view and innovation theory, this paper aims to examine the impact of DT on firm performance.Design/methodology/approachThis paper empirically tests the impact of DT on firm performance by selecting total factor productivity and innovation outputs as mediating variables from the perspective of process and outcomes, respectively. It uses Shanghai and Shenzhen A-share-listed companies from 2010–2021 as research samples, searching the frequency of keywords about DT in their annual reports.FindingsThe findings reveal the following. First, DT can significantly improve the performance of firms. Second, total factor productivity and innovation outputs play a mediating role between DT and firm performance. Third, the impact of DT on SMEs is more obvious than in bigger ones. However, the effect of DT on performance is more significant in SOEs than non-SOEs. Furthermore, DT positively effects labor-intensive and technology-intensive firms, but negatively effects capital-intensive firms.Originality/valueThis paper first proposes the mechanism analysis from the view of process and outcomes, by using total factor productivity and innovation outputs, which adds depth to the research on the impact of DT on firm performance. Moreover, the authors empirically examine the heterogeneity of the impact of DT on different firm sizes, firm properties and intensity of production factors.

Market competition and firm behavior: A comprehensive study on the impact of antimonopoly law

This study examines the impact of the antimonopoly law on corporate social responsibility (CSR) in China by analyzing the diverse effects on different types of enterprises and employee groups. The implementation of the law aimed to foster a fairer competitive market by dismantling monopolistic forces, particularly in their wage decisions. Utilizing a difference-in-differences (DID) approach, we find that the law significantly promotes CSR, especially in labor-intensive enterprises, which show a greater commitment to social responsibility compared with technology-intensive firms. The positive effect on ordinary employees’ wages is more pronounced than on managerial staff, highlighting increased wage fairness and transparency. These findings contribute to the understanding of how regulatory frameworks shape corporate behavior and social responsibility.

How do Capital Market Pressures Affect Pay Structures? Evidence Based on Short Selling and Firms’ Internal Pay Gaps

This paper examines the relationship between short selling and internal pay gaps of listed companies, and explores how short selling affects the company's pay structure. To this end, this paper utilizes the data of Chinese A-share listed companies from 2008 to 2022, and adopts the staggered-DID method, and finds that short selling significantly increases the internal pay gaps of firms subject to the short selling mechanism, but gaps are instead narrowed in SOEs and technology-intensive firms. The mechanism analysis suggests that short selling widens pay gaps by increasing the demand for highly educated managers and their compensation for job risk. The result of this paper provides a new perspective for understanding the socio-economic effects of capital market policies, as well as a rationale for formulating fair and reasonable pay policies.

Empirical Analysis of the Impact of Human Capital on Corporate Digitalization

Using panel data from A-share listed companies between 2007 and 2021, this study empirically examines the theoretical mechanisms through which human capital influences the digitalization of Chinese enterprises. The findings reveal that upgrading corporate human capital effectively empowers the digitalization of Chinese firms, a conclusion that is robust across a series of tests. Mechanism analysis indicates that the enhancement of human capital primarily facilitates corporate digitalization through improvements in R&D innovation and management levels. Heterogeneity analysis shows that the positive impact of human capital upgrading on corporate digitalization is more pronounced in the eastern and central regions, technology-intensive firms, and high-tech enterprises. These conclusions provide valuable insights for further promoting corporate human capital enhancement and digitalization.

Automated machines and the labor wage gap

This paper analyzes how the increase in the proportion of automated machines to general capital inputs affects the wage gap of the labor force complementary to the two types of capital, the general equilibrium model and constant elasticity of substitution production function are introduced and the impact mechanism is explored using a task-based model. Data for listed Chinese manufacturing companies from 2012 to 2020 is used and a double fixed effects model is invoked for empirical testing. The findings show that (1) a rise in the proportion of automated machines to general capital inputs increases the wage gap of labor complementary to automated machine capital and general capital, and a rise in the proportion of demand for both types of labor complementary to automated machines and general capital is an influential mechanism; (2) the productivity-enhancing effect suppresses the widening of the wage gap between the two types of labor; and (3) the results of heterogeneity analysis show that an increase in automated machine inputs among non-state-owned manufacturing firms and technology-intensive firms widens the labor wage gap. This paper makes a contribution to both theoretical and empirical analysis and provides references for the alleviation of the labor wage gap.

Do companies improve their ability to innovate sustainably as a result of ESG ratings?

Promoting the ESG concept is of great significance for the realization of the ‘Carbon Peaking and Carbon Neutrality’ Goals and ESG has gradually become a comprehensive system for evaluating sustainable development. Based on the 2015 ESG ratings of SynTao Green Finance as a quasi-natural experiment and based on the panel data of China's A-share listed companies from 2010 to 2020, this study deeply explores the impact of ESG ratings on the continuous innovation ability of enterprises by constructing a multi-temporal double-difference model and a triple-difference model. The results show that ESG ratings can significantly enhance firms’ continuous innovation ability, a conclusion supported by a series of robustness tests. The positive impact of ESG ratings is more prominent for firms with low market attention, state-owned enterprises, and firms with high digital transformation. The impact mechanism suggests that ESG ratings advance firms’ ability to continuously innovate by increasing employment, improving employee income, and enhancing firm value. It is further found that ESG ratings are more effective in enhancing the continuous innovation ability of heavy polluters and capital – and technology-intensive firms than other firms. The findings of the study help to promote the sustainable development of enterprises and realize the synergy between ESG construction and high-quality development.

The impact of intellectual capital on financial performance: An empirical investigation of Indian technology industry

This paper examined the association of intellectual capital and physical capital with financial performance (productivity and profitability) and market valuation (MB) in technology sector of India. IC efficiency of the companies was measured through Value added intellectual coefficient (VAIC) methodology. To examine the relationship of intellectual capital with financial performance and market valuation, the panel regression models have been employed in the study. The results evinced that value added intellectual capital coefficient (VAIN) has no relationship financial performance measures (ATO and ROA) and market valuation (MB) respectively. The results also found that physical and financial capital (VACA) has a significant influence on productivity and profitability of the organization. It is divulged that Indian technology-intensive firms still depend on tangible assets for organizational efficiency. This study is an eye opener for policy makers, government officials and other stakeholders to analyze the factors for non-existence relationship of intellectual capital with financial performance and market valuation respectively.

The impact of high-speed railway on firms’ productivity

Using a multi-sector trade model with heterogeneous firms, this paper examines how the high-speed railway (HSR) results in changes in market access, and affects firms’ productivity. The model shows that with the opening of HSR in cities and decrease in trade costs, firm productivity increases through “competition effect” (proxied by consumer market access, CMA), but decrease through “scale expansion effect” (proxied by firm market access, FMA). To distinguish between these two competing effects empirically, we manually compile data of 110 prefecture cities which are sequentially connected with HSR during 2007–2013, and match these cities with China Industrial Firms Database during same period. We find that firm productivity increase by 0.0318 percentages due to one percentage increase in CMA, and decrease by 0.0552 percentages due to one percentage increase in FMA. We find significant heterogeneity in the effect of HSR opening on firm productivity in that the effect is the largest in the central area and mostly insignificant in the west; and the effect turns out the largest for technology-intensive firms, less for capital-intensive firms and the least for labor-intensive firms. We also find the impact of HSR opening on firm revenue, output, decision of entry or exit, as well as on regional productivity. Further analyses suggest that the effect of scale expansion dominates in the period after 2009 and hinders firm productivity, which explains the puzzling divergence of rising GDP and decreasing average TFP in that period.

The Impact of Digital Economy on Firm Performance: Evidence from China

ABSTRACT This paper employs a multidimensional fixed effects model and examines the impact of the digital economy on the performance of firms in traditional industries. We have identified a pattern similar to the “IT productivity paradox” observed in the United States during the 1980s. Using data from A-share listed Chinese firms from 2011–2019, we find that the digital economy significantly reduces the short-term performance of firms by intensifying market competition and increasing adjustment costs. On the contrary, the digital economy improves firms’ long-term performance through accumulation of human capital and greater innovation capability. Competitive strategies strengthen the effect of the digital economy on the long-term performance of firms. Additionally, our research demonstrates that technology-intensive firms and small firms experience more pronounced negative effects in the short term but firms with high-tech titles suffer smaller shocks than other technology-intensive firms. These findings presents novel perspectives on the influence of the digital economy on firm performance, offering valuable insights for managers, investors, and policymakers involved in economic decision-making.

Digital heterogeneities in developing countries

This article investigates patterns of digital technologies’ adoption by industrial firms of selected developing countries, namely: Argentina, Brazil, Ghana, Thailand, and Vietnam. The objective is to identify inter and intra countries’ similarities and differences in terms of digital adoption, and understand how this distribution is leading to digital heterogeneities thus reinforcing the well-entrenched structural heterogeneity prevailing in these economies. The analysis is based on surveys carried out between 2017 and 2019 that covered a panel of 1,212 firms of varied sizes and industries. The evidence shows that most firms are currently adopting a low level of digitalization and have a positive expectation for the future even with a low level of readiness. The larger and technology intensive firms are, the higher the probability of firms being digitally progressive. These results suggest an increase of inter and intra countries’ asymmetries in digital adoption, bringing the emergence of digital heterogeneities.

Climate policy uncertainty and corporate green innovation: Evidence from Chinese A-share listed industrial corporations

Confronted with the increasingly severe climate change, frequent changes in Chinese government decrees have enhanced climate policy uncertainty. This study explores the relationship between climate policy uncertainty (CPU) and corporate green innovation (GI) using data from A-share industrial companies listed in China's Shanghai and Shenzhen markets from 2011 to 2020. Results show that climate policy uncertainty positively contributes to firms' green innovation. Secondly, there is significant heterogeneity in the effect of uncertainty in climate policy on firms' green innovation, with a more substantial effect on non-state enterprises, energy-providing industries, and technology-intensive firms. Furthermore, climate policy uncertainty can increase regional environmental regulations and the level of R&D investment by firms, leading to an increase in the level of green innovation by firms. Reducing differential policy treatment by governments and increasing R&D investment by firms are, therefore, important ways to enhance green innovation and improve the competitiveness of enterprises.

Mandatory R&D disclosure and analyst forecast Accuracy: Evidence from an emerging market

Exploiting the mandatory R&D disclosure policy in China, we capitalize on a difference-in-differences framework to examine whether mandatory R&D disclosure matters to analyst forecast accuracy in a sample of technology intensive firms. We find that, after mandatory R&D disclosure, forecast errors decrease significantly more for treatment firms (i.e., firms that chose not to disclose R&D investments before the mandate policy) relative to control firms (i.e., firms that did voluntary disclosure of R&D investments before the mandate policy). Further, we show that the impact of mandatory R&D disclosure is more pronounced when there is high information asymmetry within the firm or an industry as well as when analysts are working under unfavorable conditions. Overall, our findings demonstrate the positive effect of mandatory R&D disclosure on reducing information asymmetry and shed light on the importance of R&D disclosure reform in developing markets.

The impact of green mergers and acquisitions on illegal pollution discharge of heavy polluting firms: Mechanism, heterogeneity and spillover effects

This paper is to discuss the impact of green mergers and acquisitions (GMA) on illegal pollution discharge (ILP). The diurnal difference pollution data of the nearest monitoring station around heavy polluting enterprises are used to measure ILP. Results show that: (1) Compared with polluting firms that have not conducted GMA, GMA can reduce ILP by 2.9%. (2) Large scale, strong industrial correlation and cash payment of GMA is more conducive to controlling ILP. GMA in the same city is easier to inhibit ILP. (3) Impact paths of GMA on ILP mainly include cost effect, technology effect and responsibility effect. GMA aggravates ILP by increasing management costs and risk control risks. GMA inhibits ILP by increasing green innovation, environmental protection investment, social responsibility performance and environmental information disclosure. (4) GMA has a greater inhibition effect on ILP in state-owned firms, technology-intensive firms and eastern firms. (5) The industrial spillover effect of GMA is more obvious than that of the same city. This paper provides implications for curbing ILP from the perspective of GMA.

The effect of export tax rebate policy reform on SO2 emission intensity of firms in China

The development of trade has brought about serious pollution problems, and the impact of trade policies on firms' pollution has attracted attention. Taking the export tax rebate (ETR) policy changes of “the highly energy, highly polluting and resource consuming” (HHR) products as an exogenous shock, we examine the impact of the ETR reform on the SO2 emission intensity of Chinese industrial firms by using the time-varying DD method. The study found that the ETR policy reform of HHR products could reduce the SO2 emission intensity of firms by increasing the investment of environmental protection equipment and improving the energy utilization of technology of enterprises. The heterogeneity analysis shows that the policy has a more significantly effect on technology-intensive firms, the firms with a cleaner export product structure and the firms located in less environmentally protection force areas. The findings of this paper provide empirical evidence to support the governance of corporate pollution from the perspective of ETR policy.

Work conformity as a double-edged sword: Disentangling intra-firm social dynamics and employees' innovative performance in technology-intensive firms

Employees' innovative performance determines an organization's long-term sustainability and competitive advantages, particularly in the technology sector. Drawing on social exchange and work conformity theory, we investigate how employees' informational and normative conformity relates to their innovative performance through the lens of instrumental and expressive ties. R&D managers and professional-level employees from Taiwan's 2000 largest high-tech firms participate in the survey. Hypotheses were tested using structural equation modeling with a valid sample of 399 responses from the participants. The findings reveal that, through the mediating roles of instrumental and expressive ties, employees' informational conforming behaviors promote their innovative performance. In contrast, normative conformity may reduce employees' innovative performance by weakening their social ties. Conformist behaviors have long been deemed as the inhibitor of creativity and innovation. Nevertheless, this study adopts a social exchange perspective and clarifies how conformity can both promote and hinder professional employees' innovative performance by affecting their social networking. The paper concludes with managerial implications, discussion, and recommendations for future research.

Digital Transformation of Production Tools: Industrial Robots Transform Inventory Management in Manufacturing

Industrial transformation characterized by informatization, digitization and intelligence is advancing in depth, and intelligent technologies are being used on the ground, and the results of digital transformation in the production field, represented by industrial robots, have been widely integrated into economic production activities, so it is necessary to study the economic consequences of them. In this research, the influence of using industrial robots on the inventory management capabilities of Chinese manufacturing enterprises is investigated by using data related to inventory management of listed Chinese manufacturing enterprises from 2011-2019, and an index of industrial robot penetration of Chinese manufacturing enterprises is constructed. The empirical results show that industrial robots significantly improve the inventory control ability of enterprises. Controlling for factors such as firm characteristics, a 1% increase in the penetration rate of industrial robots in manufacturing firms was associated with a 10.66-day reduction in inventory turnover days. A test of heterogeneity revealed that firms with low financing constraints and technology-intensive firms improved their inventory control capabilities more. The study verifies the effect of industrial robots on the inventory control capability of enterprises and provides decision support for enterprises to carry out digital transformation in the production area.

Spatial threshold effect of tax competition on carbon dioxide emissions intensity in China

ABSTRACT Tax policymaking in China has created conditions for local governments to strategically leverage tax policies (e.g. tax preferences, tax collection and management efficiency, and fiscal subsidies) to have carbon dioxide (CO2) emissions peak before 2030 and carbon neutrality before 2060. By constructing an endogenous growth model with tax competition, capital mobility, technological innovation, and carbon emissions, this study investigates how tax competition is influencing firm-level behaviour and providing climate-relevant policy implications. It has theoretically demonstrated that this effect depends on technological innovation and operates through the capital mechanism. This finding is empirically confirmed in this analysis using a spatial panel threshold model with fixed effects designed to fit a balanced provincial panel dataset in China over the period 2005–2018. The main results are fourfold. First, provinces with similar carbon emissions intensity (CEI) tend to cluster spatially. That is, a province with a high CEI usually has neighbours with high CEIs. Second, a threshold effect is confirmed, revealing that higher tax collection and management efficiency (lower tax competition) decreases CEI if technological innovation is below the threshold value; otherwise, lower tax competition usually increases CEI. Third, capital mobility is a potential mechanism through which tax competition influences CEI. Specifically, provinces with a high level of technological innovation attract more knowledge- and technology-intensive firms and crowd out firms with low innovation capacities, potentially reducing local CEI. Finally, as indicated in our spatial heterogeneity analysis, the effect of higher tax competition decreasing CEI is only observed in the western region. These findings suggest the need for cross-provincial collaboration in developing taxation policies to ensure these policies help to advance the transition to a low-carbon economy and raise capital entry barriers for high-carbon emission projects in provinces with a low level of technological innovation. Key policy insights: Cross-provincial taxation policies can be designed to encourage the transition to a low-carbon economy due to spatial agglomeration and heterogeneity of carbon emissions intensity (CEI). The focus of tax competition should be knowledge- and technology-intensive firms with a high level of technological innovation. Tax competition can be relaxed in China’s provinces with a low level of technological innovation to reduce CEI; otherwise, it should be strengthened. The central government in China could usefully raise capital entry barriers for high-carbon emission projects in provinces with low levels of technological innovation and guide local governments to attract more projects with high returns and low carbon emissions to avoid a race to the bottom.

How do Internet applications affect process innovation in Chinese manufacturing companies?

This study distinguishes between two dimensions of firm process innovation, namely, quantity and quality, and uses data from the World Bank’s China Manufacturing Firm Survey to analyse the differential impact of Internet applications on the quantity and quality of process innovation and their mechanisms of action. Internet applications have a significant facilitating effect on the quantity and quality of process innovation. However, from the perspective of the average marginal effect, the facilitating effect of Internet applications on the quantity of process innovation is greater than that on the quality of process innovation. Further analysing firm size, industry, ownership, and regional heterogeneity shows that in terms of the quantity of process innovation, Internet applications have a greater impact on small- and medium-sized firms, labour-intensive firms, non-state-owned firms, and eastern firms. As for the quality of process innovation, Internet applications have a stronger promoting effect on large firms, technology-intensive firms, and state-owned firms. The mechanism test reveals that open innovation and informatisation capability play a mediating role in the influence of a firm’s Internet applications on process innovation. This study provides micro-empirical evidence for firms’ Internet applications to promote process innovation and policy insights into China’s manufacturing transformation and upgrading.

A study of smartphone companies: do innovation culture and radical innovation affect institutionalization and sustainable competition positively?

Objective of the study: The present study examines how innovation culture and radical innovation elicit sustainable competition. The study proposes institutionalization as an important underlying mechanism that originates from innovation culture and radical innovation and provides the basis for sustainable competition.Design/methodology/approach: The data were collected from 763 employees working in smartphone companies located in Istanbul, Turkey. The analysis was performed employing PROCESS macro in order to test the hypothesized relationships.Findings: Results show that both innovation culture and radical innovation have a positive impact on institutionalization and sustainable competition. Moreover, the data also support the mediation effect of institutionalization in predicting sustainable competition.Practical implications: The findings imply that the structure of the firms must be ready for change in order to reap the benefits of sustainable competition. In fact, the creation of an innovation culture is very important in technology-intensive firms because there is a need to create common values that encourage employees to adopt innovative behaviors for sustainable competition. Furthermore, radical innovation can be more advantageous for firm-outcomes when large structural differences are identified and bridged successfully.Originality/value: The study develops a novel framework of innovation-competition using a structural perspective, empirically testing the proposed relationships using data from the technology-intensive industry of Turkey.

Stringent environmental regulation and capital structure: The effect of NEPL on deleveraging the high polluting firms

This paper studies the impact of stringent environmental regulation on the financial behavior of firms. Using panel data of Chinese listed companies from 2009 to 2018, we take the implementation of the new environmental protection law (NEPL) in 2015 as a quasi-natural experiment and identify its impact on the deleveraging of high polluting firms. The possible reason is that the nationwide legal construction by NEPL will set the tone of environmental governance for a long time in the future. Considering the environmental legitimacy and sustainable development, firms change their strategies and reduce their short-sighted behaviors, which are reflected in the changes in investment and financing. On the one hand, banks cut down loans to high polluting firms with environmental risks and increase their financing costs, thereby reducing leverage. On the other hand, firms reduce fixed asset investment and increase R&D and environmental expenditures under the formal supervision of the government and unformal supervision of other stakeholders, realizing deleveraging and green transformation. Considering the heterogeneity of firms, NEPL has a greater effect on state-owned firms, small-scale firms, technology-intensive firms, firms without political connections, high financing constraints firms, and firms in the decline stage. This study identifies the effectiveness of environmental governance on the deleveraging of high polluting firms for lowering financial risks for the first time. Our empirical evidence strongly supports that China's new environmental protection law can realize a win-win situation of the environment and economy.