From red tape to digital tape: Digital government construction and corporate vertical specialization in China

Driven by emerging technologies, the rise of digital government is not only reshaping public administration but also profoundly impacting industrial organization. This study investigates how government digitalization redefines corporate boundaries in China, with a specific focus on corporate vertical specialization. Utilizing a difference-in-differences method on a sample of listed manufacturing firms from 2010 to 2022, we demonstrate that digital government construction significantly promotes corporate vertical specialization. Mechanism analyses reveal that this promotive effect operates primarily by reducing transaction costs and mitigating environmental and political uncertainties. Furthermore, heterogeneity tests indicate that this effect is more pronounced among non-state-owned enterprises, firms with high asset specificity, and those located in regions with weaker business environments. We also find that the specialization effect is amplified by robust regional digital infrastructure and accelerated corporate digital transformation, which jointly facilitate government-enterprise digital integration. Ultimately, these findings provide valuable policy implications for leveraging public sector digitalization to foster efficient markets and optimize industrial structures.