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The power of competition: Unveiling China's digital transformation through product market dynamics

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  • Fan, Jiaying
  • Xu, Meiling

Abstract

This study investigates the non-linear relationship between product market competition (PMC) and digital transformation (DTF) in China's digital economy, utilizing data from a large sample of Chinese firms. The findings reveal a U-shaped relationship, wherein DTF initially decreases and then increases as competition intensifies. Furthermore, we examine the impact of financing constraints on this relationship and discover a negative effect on the “U-shaped” relationship. These results emphasize the necessity for companies to update their transformation strategies for sustained competitiveness and adaptability, providing fresh insights into digital transformation complexities in competitive environments.

Suggested Citation

  • Fan, Jiaying & Xu, Meiling, 2024. "The power of competition: Unveiling China's digital transformation through product market dynamics," Economics Letters, Elsevier, vol. 234(C).
    • Handle: RePEc:eee:ecolet:v:234:y:2024:i:c:s0165176523005050
    DOI: 10.1016/j.econlet.2023.111479
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    References listed on IDEAS

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    1. Im, Hyun Joong & Park, Young Joon & Shon, Janghoon, 2015. "Product market competition and the value of innovation: Evidence from US patent data," Economics Letters, Elsevier, vol. 137(C), pages 78-82.
    2. Wu, Keping & Fu, Yumei & Kong, Dongmin, 2022. "Does the digital transformation of enterprises affect stock price crash risk?," Finance Research Letters, Elsevier, vol. 48(C).
    3. Mo, Yan & Liu, Xiaotong, 2023. "Climate policy uncertainty and digital transformation of enterprise—Evidence from China," Economics Letters, Elsevier, vol. 233(C).
    4. Hussein Ali Abdoh, 2019. "Product market competition and productivity shocks," Applied Economics, Taylor & Francis Journals, vol. 51(37), pages 4104-4115, August.
    5. Wen, Huwei & Zhong, Qiming & Lee, Chien-Chiang, 2022. "Digitalization, competition strategy and corporate innovation: Evidence from Chinese manufacturing listed companies," International Review of Financial Analysis, Elsevier, vol. 82(C).
    6. Abdoh, Hussein, 2019. "Product market competition and earnings exposure to productivity shocks," Economics Letters, Elsevier, vol. 174(C), pages 31-34.
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    Cited by:

    1. Miao, Yongming & Li, Yaokuang & Wu, Yanrui, 2024. "Digital economy and economic competitive pressure on local governments: Evidence from China," Economic Modelling, Elsevier, vol. 140(C).
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    3. Yongming Miao & Yaokuang Li & Yanrui Wu, 2024. "Digital economy and economic competitive pressure on local governments: Evidence from China," Economics Discussion / Working Papers 24-06, The University of Western Australia, Department of Economics.
    4. Jiang, Li & Li, Bin & Zhang, Min, 2025. "The impact of digital transformation on the efficiency of corporate resource allocation: Internal mechanisms and external environment," Technological Forecasting and Social Change, Elsevier, vol. 215(C).

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