Government Attention, Market Competition and Firm Digital Transformation

Abstract

Clarifying the driving factors of enterprise digital transformation can help us understand the real driving forces of industrial digitization and digital industrialization, improve the implementation of industrial policies, and narrow the digital divide between different regions and firms to facilitate high-quality and sustainable development. Based on 38,891 news items from provincial and municipal governments in China, this paper uses text analysis to depict the government’s attention to the digital economy and explore the influencing factors driving digital transformation. In the empirical analysis, government attention to the digital economy positively impacts enterprise digital transformation primarily through fiscal expenditures on science and technology, the digital economy level, the digital financial inclusion level, industrial agglomeration, and firm nature. The positive impact of market competition on enterprise digital transformation is significant for small-scale firms. The insight from this finding is that enterprise digital transformation cannot be solved entirely by market forces but also needs to be led by digital industrial policies with government attention.