Can state ownership help facilitate the digital transformation of private sector enterprises? Evidence from China

Abstract

This study investigates the role of state ownership in driving the digital transformation of private sector enterprises (PSEs) in China, using data from A-share listed firms between 2012 and 2022. Digital transformation is critical for PSEs to maintain competitiveness in an increasingly technology-driven economy, and state ownership provides unique resources and strategic support to achieve this. Our analysis reveals that state ownership enhances PSEs’ adoption of innovative technologies, with its impact varying by investor type. When acting as a strategic investor, state ownership significantly facilitates digital transformation, whereas its role as a financial investor has a more limited effect. This influence is stronger in cities with favorable business environments and in emerging industries. Furthermore, state ownership helps mitigate risks from policy uncertainty and boosts innovation outputs, ultimately driving greater digital transformation. These findings underscore the strategic importance of state ownership in fostering technological advancement and resilience in PSEs.