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The Construction of Free Trade Zones Drives Digital Transformation: Empirical Evidence from Chinese Listed Enterprises

Author

Listed:
  • Weilong Wang

    (Sichuan University)

  • Deheng Xiao

    (University of International Business and Economics)

  • Jianlong Wang

    (Sichuan University)

Abstract

The construction of China’s Free Trade Zones (FTZs) promotes high-quality economic development. And with the continuous development of information technology, as well as the popularity and application of artificial intelligence, big data, cloud computing, and other technologies, the construction of FTZs offers more possibilities for enterprises to implement digital transformation. Constructing China’s Free Trade Zones (FTZs) encourages high-quality economic growth. As an essential path in support of high-quality economic development, it is imperative to clarify the intrinsic connection between enterprise digital transformation (EDT) and the establishment of FTZs. The article analyzes the impact of constructed FTZs on EDT based on 2010–2019 microdata of A-share listed enterprises in Shanghai and Shenzhen. It is observed that FTZ construction promotes EDT. After a number of robustness tests, this finding is still valid. The mechanism analysis confirms that constructed FTZs enhance EDT by weakening firms’ external economic policy uncertainty and improving firms’ internal innovation performance. Through heterogeneity analysis, this paper finds that leveraging firm value, improving firms’ ESG performance, and strengthening firms’ digital finance development are effective ways for FTZs to promote EDT. Finally, the analysis of environmental consequences shows that China’s FTZ construction reduces carbon emissions and improves air pollution caused by the development process by enhancing EDT. The study’s findings help provide a valuable policy basis for further expanding, allowing access to the outside world, and promoting the digital development of enterprises.

Suggested Citation

  • Weilong Wang & Deheng Xiao & Jianlong Wang, 2025. "The Construction of Free Trade Zones Drives Digital Transformation: Empirical Evidence from Chinese Listed Enterprises," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 1204-1235, March.
    • Handle: RePEc:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-02053-1
    DOI: 10.1007/s13132-024-02053-1
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