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Market competition and digital transformation in firms

Author

Listed:
  • Nguyen, Thithuha
  • Song, Ge
  • Zhao, Shengkun
  • Zuo, Congjiang

Abstract

This paper examines the impact of market competition on firms' digital transformation. Using data from Chinese listed companies, we measure market competition at the firm-year level by analyzing product and service descriptions in annual reports. Results show that higher market competition increases the likelihood of digital transformation, driven by more digital patent inventions. Heterogeneity analysis reveals that the effect is more pronounced in non-state-owned firms and for firms in more market-oriented environments.

Suggested Citation

  • Nguyen, Thithuha & Song, Ge & Zhao, Shengkun & Zuo, Congjiang, 2025. "Market competition and digital transformation in firms," Finance Research Letters, Elsevier, vol. 73(C).
    • Handle: RePEc:eee:finlet:v:73:y:2025:i:c:s1544612324017136
    DOI: 10.1016/j.frl.2024.106684
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    More about this item

    Keywords

    Market competition; Digital transformation; Innovation; Machine Learning; Text Analysis;
    All these keywords.

    JEL classification:

    • L1 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance
    • O33 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Technological Change: Choices and Consequences; Diffusion Processes
    • D22 - Microeconomics - - Production and Organizations - - - Firm Behavior: Empirical Analysis

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