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Will enterprise digital transformation affect diversification strategy?

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  • Ge-zhi Wu
  • Da-ming You

Abstract

This paper empirically examines the impact of enterprise digital transformation on the level of enterprise diversification. It is found that the digital transformation of enterprises has significantly improved the level of enterprise diversification, and the conclusion has passed a series of robustness tests and endogenous tests. Through mechanism analysis, we find that the promotion effect of enterprise digital transformation on enterprise diversification is mainly realized through market power channel and firm risk channel, the pursuit of establishing market power, monopoly profits and challenge the monopolistic position of market occupiers based on digital transformation and the decentralization strategy to deal with the risks associated with digital transformation are important reasons for enterprises to adopt diversification strategy under the background of digital transformation. Although the organization costs channel, transaction costs channel, block holder control channel, industry type and information asymmetry channel have some influence on the main effect of this paper, they are not the main channel because they have not passed the inter group regression coefficient difference test statistically.

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  • Ge-zhi Wu & Da-ming You, 2021. "Will enterprise digital transformation affect diversification strategy?," Papers 2112.06605, arXiv.org, revised Aug 2022.
    • Handle: RePEc:arx:papers:2112.06605
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    References listed on IDEAS

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    7. David J. Teece, 2008. "The Multinational Enterprise: Market Failure and Market Power Considerations," World Scientific Book Chapters, in: The Transfer And Licensing Of Know-How And Intellectual Property Understanding the Multinational Enterprise in the Modern World, chapter 18, pages 405-419, World Scientific Publishing Co. Pte. Ltd..
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    Cited by:

    1. Richardson, Grant & Obaydin, Ivan & Liu, Chelsea, 2022. "The effect of accounting fraud on future stock price crash risk," Economic Modelling, Elsevier, vol. 117(C).
    2. Yan, Weichen & Cai, Zhipeng & Yang, Aishu, 2023. "Leading the charge: The impact of executives with R&D backgrounds on corporate digital transformation," Finance Research Letters, Elsevier, vol. 56(C).
    3. Aurelija Burinskienė & Milena Seržantė, 2022. "Digitalisation as the Indicator of the Evidence of Sustainability in the European Union," Sustainability, MDPI, vol. 14(14), pages 1-20, July.
    4. Shutter Zor, 2024. ""Digitwashing": The Gap between Words and Deeds in Digital Transformation and Stock Price Crash Risk," Papers 2403.01360, arXiv.org.
    5. Xiangan Ding & Zhonglin Sheng & Andrea Appolloni & Mohsin Shahzad & Shaojie Han, 2024. "Digital transformation, ESG practice, and total factor productivity," Business Strategy and the Environment, Wiley Blackwell, vol. 33(5), pages 4547-4561, July.
    6. Zhu, Shuo & Gao, Jun & Chen, Kaijun, 2023. "Digital transformation and risk of share price crash: Evidence from a new digital transformation index," Finance Research Letters, Elsevier, vol. 58(PB).
    7. Li, Weiping & Li, Tingyu & Jiang, Dequan & Zhang, Xuezhi, 2024. "Bridging the information gap: How digitalization shapes stock price informativeness," Journal of Financial Stability, Elsevier, vol. 71(C).
    8. Su, Shiwei & Jia, Songbo & Shi, Guangping, 2023. "Leverage adjustment behaviors and stock price crash risk," Finance Research Letters, Elsevier, vol. 56(C).

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