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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. Abdoh, Hussein, 2019. "Product market competition and earnings exposure to productivity shocks," Economics Letters, Elsevier, vol. 174(C), pages 31-34.
    3. 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).
    4. Mo, Yan & Liu, Xiaotong, 2023. "Climate policy uncertainty and digital transformation of enterprise—Evidence from China," Economics Letters, Elsevier, vol. 233(C).
    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).
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    Cited by:

    1. Fan, Jiaying & Wang, Yuhan & Xu, Meiling, 2024. "The more valuable the knowledge, the more focused the enterprises: Intellectual property pledge financing and diversification in high-tech enterprises," Finance Research Letters, Elsevier, vol. 70(C).
    2. 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).
    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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