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The Impact of Government Subsidies on Digital Transformation: A Mediation Analysis Based on Market Competition

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  • Xia Feng

    (Department of Economics and Management, Lyuliang University, China)

Abstract

In this study, the author investigates the impact of government subsidies on the digital transformation of manufacturing enterprises, focusing on the moderating role of market competition. She addresses the “wait-and-see” dilemma caused by high digital investment costs and fills the research gap regarding how market structures interact with financial incentives. She analyzed panel data from 7,328 Chinese A-share manufacturing firms (2010–2024) using fixed effects, two-stage least squares, and panel threshold regression, with digital levels measured via term frequency-inverse document frequency text mining. Results revealed that subsidies significantly catalyzed digitization, but the marginal benefit followed an inverted U-shaped relationship with competition. The subsidy effect peaked at 0.46 when competition was moderate (Herfindahl–Hirschman Index of 0.28–0.46); extreme competition diminished this policy efficiency significantly. High-quality accounting information amplified this effect by 12%. These findings imply that policy must be differentiated based on “competition windows” and that firms should improve transparency to maximize the digital dividend.

Suggested Citation

  • Xia Feng, 2026. "The Impact of Government Subsidies on Digital Transformation: A Mediation Analysis Based on Market Competition," Information Resources Management Journal (IRMJ), IGI Global Scientific Publishing, vol. 39(1), pages 1-20, January.
    • Handle: RePEc:igg:rmj000:v:39:y:2026:i:1:p:1-20
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