IDEAS home Printed from https://ideas.repec.org/a/spr/jknowl/v16y2025i1d10.1007_s13132-024-02053-1.html
   My bibliography  Save this article

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
    as

    Download full text from publisher

    File URL: http://link.springer.com/10.1007/s13132-024-02053-1
    File Function: Abstract
    Download Restriction: Access to the full text of the articles in this series is restricted.
    File URL: https://libkey.io/10.1007/s13132-024-02053-1?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Eller, Robert & Alford, Philip & Kallmünzer, Andreas & Peters, Mike, 2020. "Antecedents, consequences, and challenges of small and medium-sized enterprise digitalization," Journal of Business Research, Elsevier, vol. 112(C), pages 119-127.
    2. N. Bloom, 2016. "Fluctuations in uncertainty," Voprosy Ekonomiki, NP Voprosy Ekonomiki, issue 4.
    3. Liang, Lin & Li, Yan, 2023. "How does government support promote digital economy development in China? The mediating role of regional innovation ecosystem resilience," Technological Forecasting and Social Change, Elsevier, vol. 188(C).
    4. Glaeser, Edward L. & Kahn, Matthew E., 2010. "The greenness of cities: Carbon dioxide emissions and urban development," Journal of Urban Economics, Elsevier, vol. 67(3), pages 404-418, May.
    5. Jacobson, Louis S & LaLonde, Robert J & Sullivan, Daniel G, 1993. "Earnings Losses of Displaced Workers," American Economic Review, American Economic Association, vol. 83(4), pages 685-709, September.
    6. Lou, Zhukun & Chen, Siyu & Yin, Wenwei & Zhang, Chuan & Yu, Xiaoyu, 2022. "Economic policy uncertainty and firm innovation: Evidence from a risk-taking perspective," International Review of Economics & Finance, Elsevier, vol. 77(C), pages 78-96.
    7. Zhou, Gaoguang, 2022. "Good for managers, bad for shareholders? The effects of lone-insider boards on excessive corporate social responsibility," Journal of Business Research, Elsevier, vol. 140(C), pages 370-383.
    8. Jing Wu & Wei Liu, 2022. "Economic Policy Uncertainty, Investor Sentiment, and Stock Price Synchronisation: Evidence from China," Mathematical Problems in Engineering, Hindawi, vol. 2022, pages 1-8, July.
    9. Ramli, Noor Asiah & Munisamy, Susila, 2015. "Eco-efficiency in greenhouse emissions among manufacturing industries: A range adjusted measure," Economic Modelling, Elsevier, vol. 47(C), pages 219-227.
    10. Louis S. Jacobson & Robert J. LaLonde & Daniel G. Sullivan, 1993. "Long-term earnings losses of high-seniority displaced workers," Economic Perspectives, Federal Reserve Bank of Chicago, vol. 17(Nov), pages 2-20.
    11. Wan, Zheng & Zhang, Yang & Wang, Xuefeng & Chen, Jihong, 2014. "Policy and politics behind Shanghai’s Free Trade Zone Program," Journal of Transport Geography, Elsevier, vol. 34(C), pages 1-6.
    12. Kendrik Yan Hong Lim & Pai Zheng & Chun-Hsien Chen, 2020. "A state-of-the-art survey of Digital Twin: techniques, engineering product lifecycle management and business innovation perspectives," Journal of Intelligent Manufacturing, Springer, vol. 31(6), pages 1313-1337, August.
    13. Xue, Chaokai & Shahbaz, Muhammad & Ahmed, Zahoor & Ahmad, Mahmood & Sinha, Avik, 2022. "Clean energy consumption, economic growth, and environmental sustainability: What is the role of economic policy uncertainty?," Renewable Energy, Elsevier, vol. 184(C), pages 899-907.
    14. Pan, Xiongfeng & Wang, Yuqing & Zhang, Chengming & Shen, Zhiyang & Song, Malin, 2023. "The impact of platform economy on enterprise value mediated by technological innovation," Journal of Business Research, Elsevier, vol. 165(C).
    15. Jiang, Yufan & Wang, Hongyan & Liu, Zuankuo, 2021. "The impact of the free trade zone on green total factor productivity ——evidence from the shanghai pilot free trade zone," Energy Policy, Elsevier, vol. 148(PB).
    16. Hay, Donald A, 2001. "The Post-1990 Brazilian Trade Liberalisation and the Performance of Large Manufacturing Firms: Productivity, Market Share and Profits," Economic Journal, Royal Economic Society, vol. 111(473), pages 620-641, July.
    17. Jagtiani, Julapa & Lemieux, Catharine, 2018. "Do fintech lenders penetrate areas that are underserved by traditional banks?," Journal of Economics and Business, Elsevier, vol. 100(C), pages 43-54.
    18. Jin Suk Park & Eunju Hwang, 2023. "Sectoral FTA gains, conflicts, and the role of interindustry factor mobility: Evidence from Korea's free trade agreement," Pacific Economic Review, Wiley Blackwell, vol. 28(1), pages 97-123, February.
    19. Nambisan, Satish & Wright, Mike & Feldman, Maryann, 2019. "The digital transformation of innovation and entrepreneurship: Progress, challenges and key themes," Research Policy, Elsevier, vol. 48(8), pages 1-1.
    20. Battisti, Enrico & Alfiero, Simona & Leonidou, Erasmia, 2022. "Remote working and digital transformation during the COVID-19 pandemic: Economic–financial impacts and psychological drivers for employees," Journal of Business Research, Elsevier, vol. 150(C), pages 38-50.
    21. Daron Acemoglu & Pascual Restrepo, 2020. "Robots and Jobs: Evidence from US Labor Markets," Journal of Political Economy, University of Chicago Press, vol. 128(6), pages 2188-2244.
    22. Kong, Qunxi & Li, Rongrong & Wang, Ziqi & Peng, Dan, 2022. "Economic policy uncertainty and firm investment decisions: Dilemma or opportunity?," International Review of Financial Analysis, Elsevier, vol. 83(C).
    23. Shang, Yuping & Raza, Syed Ali & Huo, Zhe & Shahzad, Umer & Zhao, Xin, 2023. "Does enterprise digital transformation contribute to the carbon emission reduction? Micro-level evidence from China," International Review of Economics & Finance, Elsevier, vol. 86(C), pages 1-13.
    24. 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).
    25. Ningxia Yang & Emilio Jiménez Macías, 2022. "Economic Policy Uncertainty, Managerial Ability, and the Peer Effect of Corporate Investment," Mathematical Problems in Engineering, Hindawi, vol. 2022, pages 1-15, November.
    26. Liu, Tingli & Chen, Xiao & Yang, Songling, 2022. "Economic policy uncertainty and enterprise investment decision: Evidence from China," Pacific-Basin Finance Journal, Elsevier, vol. 75(C).
    27. Verhoef, Peter C. & Broekhuizen, Thijs & Bart, Yakov & Bhattacharya, Abhi & Qi Dong, John & Fabian, Nicolai & Haenlein, Michael, 2021. "Digital transformation: A multidisciplinary reflection and research agenda," Journal of Business Research, Elsevier, vol. 122(C), pages 889-901.
    28. Li, Hongqi & Lu, Yue & Zhang, Jun & Wang, Tianyi, 2013. "Trends in road freight transportation carbon dioxide emissions and policies in China," Energy Policy, Elsevier, vol. 57(C), pages 99-106.
    29. He, Feng & Ma, Yaming & Zhang, Xiaojie, 2020. "How does economic policy uncertainty affect corporate Innovation?–Evidence from China listed companies," International Review of Economics & Finance, Elsevier, vol. 67(C), pages 225-239.
    30. Xinyue Hao & Fanglin Chen & Zhongfei Chen, 2022. "Does green innovation increase enterprise value?," Business Strategy and the Environment, Wiley Blackwell, vol. 31(3), pages 1232-1247, March.
    31. Wang, Li & Dai, Yunhao & Kong, Dongmin, 2021. "Air pollution and employee treatment," Journal of Corporate Finance, Elsevier, vol. 70(C).
    32. Gupta, Ranjit & Mejia, Cristian & Kajikawa, Yuya, 2019. "Business, innovation and digital ecosystems landscape survey and knowledge cross sharing," Technological Forecasting and Social Change, Elsevier, vol. 147(C), pages 100-109.
    33. Hao Chen & Bo Yuan & Qi Cui, 2021. "Does the pilot free trade zone policy attract the entering of foreign-invested enterprises? The evidence from China," Applied Economics Letters, Taylor & Francis Journals, vol. 28(14), pages 1162-1168, August.
    34. El-Khatib, Rwan & Fogel, Kathy & Jandik, Tomas, 2015. "CEO network centrality and merger performance," Journal of Financial Economics, Elsevier, vol. 116(2), pages 349-382.
    35. Lee, Seung-Hyun & Peng, Mike W. & Song, Sangcheol, 2013. "Governments, entrepreneurs, and positive externalities: A real options perspective," European Management Journal, Elsevier, vol. 31(4), pages 333-347.
    36. Sonia Ben Slimane & Régis Coeurderoy & Hatem Mhenni, 2022. "Digital transformation of small and medium enterprises: a systematic literature review and an integrative framework," International Studies of Management & Organization, Taylor & Francis Journals, vol. 52(2), pages 96-120, April.
    37. Te Bao & Yun Dai & Yanxiang Feng & Shuai Liu & Ruixin Wang, 2023. "Trade liberalisation and trade and capital flows: Evidence from China pilot free trade zones," The World Economy, Wiley Blackwell, vol. 46(5), pages 1408-1422, May.
    38. Karim Ben Khediri & Didier Folus, 2010. "Does hedging increase firm value? Evidence from French firms," Applied Economics Letters, Taylor & Francis Journals, vol. 17(10), pages 995-998.
    39. Veronika Movchan & Thomas F. Rutherford & David G. Tarr & Hidemichi Yonezawa, 2023. "The importance of deep integration in preferential trade agreements: the case of a successfully implemented Ukraine–Turkey free trade agreement," Review of World Economics (Weltwirtschaftliches Archiv), Springer;Institut für Weltwirtschaft (Kiel Institute for the World Economy), vol. 159(1), pages 1-50, February.
    40. Andrea Szalavetz, 2020. "Digital transformation – enabling factory economy actors’ entrepreneurial integration in global value chains?," Post-Communist Economies, Taylor & Francis Journals, vol. 32(6), pages 771-792, July.
    41. Satish Nambisan & Shaker A. Zahra & Yadong Luo, 2019. "Global platforms and ecosystems: Implications for international business theories," Journal of International Business Studies, Palgrave Macmillan;Academy of International Business, vol. 50(9), pages 1464-1486, December.
    42. Rui Li & Jing Rao & Liangyong Wan, 2022. "The digital economy, enterprise digital transformation, and enterprise innovation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 43(7), pages 2875-2886, October.
    43. Xiaoxi Deng & Ying Wang & Gi-Tae Yeo, 2017. "Enterprise Perspective-based Evaluation of Free Trade Port Areas in China," Maritime Economics & Logistics, Palgrave Macmillan;International Association of Maritime Economists (IAME), vol. 19(3), pages 451-473, August.
    44. Wu, Yilin & Huang, Shilei, 2022. "The effects of digital finance and financial constraint on financial performance: Firm-level evidence from China's new energy enterprises," Energy Economics, Elsevier, vol. 112(C).
    45. Wen, Fenghua & Li, Cui & Sha, Han & Shao, Liuguo, 2021. "How does economic policy uncertainty affect corporate risk-taking? Evidence from China," Finance Research Letters, Elsevier, vol. 41(C).
    46. Si Luo & Miaochao Chen, 2022. "Digital Finance Development and the Digital Transformation of Enterprises: Based on the Perspective of Financing Constraint and Innovation Drive," Journal of Mathematics, Hindawi, vol. 2022, pages 1-10, March.
    47. Li, Sujuan & Liu, Jiaguo & Kong, Yudan, 2021. "Pilot free trade zones and Chinese port-listed companies performance: An empirical research based on quasi-natural experiment," Transport Policy, Elsevier, vol. 111(C), pages 125-137.
    48. Riadh Manita & Najoua Elommal & Patricia Baudier & Lubica Hikkerova, 2020. "The digital transformation of external audit and its impact on corporate governance," Post-Print hal-04314467, HAL.
    49. He, Feng & Du, Hanyu & Yu, Bo, 2022. "Corporate ESG performance and manager misconduct: Evidence from China," International Review of Financial Analysis, Elsevier, vol. 82(C).
    50. Soga, Lebene Richmond & Bolade-Ogunfodun, Yemisi & Mariani, Marcello & Nasr, Rita & Laker, Benjamin, 2022. "Unmasking the other face of flexible working practices: A systematic literature review," Journal of Business Research, Elsevier, vol. 142(C), pages 648-662.
    51. Manita, Riadh & Elommal, Najoua & Baudier, Patricia & Hikkerova, Lubica, 2020. "The digital transformation of external audit and its impact on corporate governance," Technological Forecasting and Social Change, Elsevier, vol. 150(C).
    52. Matarazzo, Michela & Penco, Lara & Profumo, Giorgia & Quaglia, Roberto, 2021. "Digital transformation and customer value creation in Made in Italy SMEs: A dynamic capabilities perspective," Journal of Business Research, Elsevier, vol. 123(C), pages 642-656.
    53. Liu, Jiaguo & Wang, Xiaoye & Guo, Junyu, 2021. "Port efficiency and its influencing factors in the context of Pilot Free Trade Zones," Transport Policy, Elsevier, vol. 105(C), pages 67-79.
    54. Feng, Suling & Zhang, Rong & Li, Guoxiang, 2022. "Environmental decentralization, digital finance and green technology innovation," Structural Change and Economic Dynamics, Elsevier, vol. 61(C), pages 70-83.
    55. Huseyin Gulen & Mihai Ion, 2016. "Editor's Choice Policy Uncertainty and Corporate Investment," The Review of Financial Studies, Society for Financial Studies, vol. 29(3), pages 523-564.
    56. Xu, Zhaoxia, 2020. "Economic policy uncertainty, cost of capital, and corporate innovation," Journal of Banking & Finance, Elsevier, vol. 111(C).
    57. Bernard S. Black & Hasung Jang & Woochan Kim, 2006. "Does Corporate Governance Predict Firms' Market Values? Evidence from Korea," The Journal of Law, Economics, and Organization, Oxford University Press, vol. 22(2), pages 366-413, October.
    58. ElMassah, Suzanna & Mohieldin, Mahmoud, 2020. "Digital transformation and localizing the Sustainable Development Goals (SDGs)," Ecological Economics, Elsevier, vol. 169(C).
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Wang, Weilong & Xiao, Deheng & Wang, Jianlong & Wu, Haitao, 2024. "The cost of pollution in the digital era: Impediments of air pollution on enterprise digital transformation," Energy Economics, Elsevier, vol. 134(C).
    2. Xiao, Deheng & Xu, Jinlong & Li, Qiyuan, 2024. "The “Double-Edged Sword” effect of air quality information disclosure policy—Empirical evidence based on the digital transformation of Chinese listed companies," Energy Economics, Elsevier, vol. 133(C).
    3. Alam, Ahmed W. & Farjana, Ashupta & Houston, Reza, 2023. "Firm investment steering through state-level policy uncertainty," Finance Research Letters, Elsevier, vol. 58(PC).
    4. Guo, Chenhao & Ke, Yun & Zhang, Jinkang, 2023. "Digital transformation along the supply chain," Pacific-Basin Finance Journal, Elsevier, vol. 80(C).
    5. Plekhanov, Dmitry & Franke, Henrik & Netland, Torbjørn H., 2023. "Digital transformation: A review and research agenda," European Management Journal, Elsevier, vol. 41(6), pages 821-844.
    6. Sultan Sikandar Mirza & Chengming Huang & Adnan Khan, 2024. "Managing CEO duality and economic uncertainty: strategies for aligning corporate sustainability and innovation in China’s energy market," Environment, Development and Sustainability: A Multidisciplinary Approach to the Theory and Practice of Sustainable Development, Springer, vol. 26(5), pages 12815-12841, May.
    7. Yin, Qiaoyi & Wang, Yunfei & Song, Dian & Lai, Fujun & Collins, Brian & Guo, Hangfei, 2024. "The impact of digitalization on operational risk: An organizational information processing perspective," International Journal of Production Economics, Elsevier, vol. 276(C).
    8. Weilong Wang & Deheng Xiao, 2025. "Marketization of Data Elements and Enterprise Green Governance Performance: A Quasi‐Natural Experiment Based on Data Trading Platforms," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 46(3), pages 1686-1700, April.
    9. Feng, Wei & Sun, Shujun & Yuan, Hang, 2023. "Research on the efficiency of factor allocation in the pilot free trade zones," Economic Analysis and Policy, Elsevier, vol. 79(C), pages 727-745.
    10. Cui, Xin & Wang, Chunfeng & Sensoy, Ahmet & Liao, Jing & Xie, Xiaochen, 2023. "Economic policy uncertainty and green innovation: Evidence from China," Economic Modelling, Elsevier, vol. 118(C).
    11. Broccardo, Laura & Tenucci, Andrea & Agarwal, Reeti & Alshibani, Safiya Mukhtar, 2024. "Steering digitalization and management control maturity in small and medium enterprises (SMEs)," Technological Forecasting and Social Change, Elsevier, vol. 204(C).
    12. Wen, Qiang & Zhang, Teng, 2022. "Economic policy uncertainty and industrial pollution: The role of environmental supervision by local governments," China Economic Review, Elsevier, vol. 71(C).
    13. Xiao, Lingmin & Zhao, Liang & Zhu, Qianyu, 2024. "Host country economic policy uncertainty, trade openness and Chinese enterprise overseas investment," International Review of Economics & Finance, Elsevier, vol. 96(PA).
    14. Muhammad Bilal & Zhao Xicang & Wu Jiying & Jan Muhammad Sohu & Sadaf Akhtar & Muhammad Iatzaz Ul Hassan, 2025. "Digital Transformation and SME Innovation: A Comprehensive Analysis of Mediating and Moderating Effects," Journal of the Knowledge Economy, Springer;Portland International Center for Management of Engineering and Technology (PICMET), vol. 16(1), pages 1153-1182, March.
    15. Chen, Zhongfei & Jiang, Kangqi, 2024. "Digitalization and corporate investment efficiency: Evidence from China," Journal of International Financial Markets, Institutions and Money, Elsevier, vol. 91(C).
    16. Xuefeng Shao & Longqi Wang & Xinda Li, 2024. "Financial asset allocations, economic policy uncertainty, and enterprise digital transformation," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 45(4), pages 2613-2626, June.
    17. Wang, Weilong & Wang, Jianlong & Ye, Huiying & Wu, Haitao, 2024. "Polluted air, smarter factories? China's robot imports shed light on a potential link," Energy Economics, Elsevier, vol. 134(C).
    18. Zhang, Jie & Wei, Huiru & Yuan, Kuiran & Yang, Xiaodong, 2024. "New industrial policy and corporate digital transformation: Empowering or impairing? Emerging evidence from green credit policy," Energy Economics, Elsevier, vol. 140(C).
    19. Yang, Hefan & Liu, Xilu & Meng, Yao & Feng, Baoyi & Chen, Zhijun, 2024. "Digital transformation and the allocation of decision-making rights within business groups – Empirical evidence from China," Journal of Business Research, Elsevier, vol. 179(C).
    20. Geng, Yini & Zheng, Zhiqiang & Ma, Yongjian, 2023. "Digitization, perception of policy uncertainty, and corporate green innovation: A study from China," Economic Analysis and Policy, Elsevier, vol. 80(C), pages 544-557.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:spr:jknowl:v:16:y:2025:i:1:d:10.1007_s13132-024-02053-1. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Sonal Shukla or Springer Nature Abstracting and Indexing (email available below). General contact details of provider: http://www.springer.com .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.