Digital economy policies and enterprise digital transformation: A quasi-natural experiment of digital economy pilot zones

This study takes the 2019 establishment of the National Pilot Zones for the Innovative Development of the Digital Economy (hereafter, Digital Economy Pilot Zones) as a quasi-natural experiment, using panel data of Chinese listed firms to explore the effects of digital economy policies on firms' digital transformation. The main findings can be summarized as follows. First, the Pilot Zones effectively incentivized firms to undertake digital transformation, which was particularly pronounced for the application of digital technologies in firms’ production, management and marketing processes, underscoring the significant role of digital policy in the early stages of China’s digital economy development. Second, the Pilot Zones enable local firms to obtain government digitalization subsidies, catalyze the construction of digital infrastructure, and attract the spatial clustering of digital enterprises and talent, thereby improving the regional digital ecosystem. Third, the promoting effect on digital transformation is stronger for firms whose executives lack information technology backgrounds, operate in more competitive markets, have higher R&D intensity, and are more labor intensive. Finally, the positive impact of the Pilot Zones is amplified in regions with advanced digital finance and stronger intellectual property protection. These results deepen the understanding of how digital economic policies affect firms' digital transformation in developing countries.