Perceptions of economic policy uncertainty and digital transformation: Evidence from China

Abstract

Purpose: This study aimed to investigate how perceptions of economic policy uncertainty affect digital transformation within enterprises, facilitating the development of more scientifically grounded transformation strategies and more precise deployment of related initiatives.
Design/methodology/approach: The research focused on A-share listed companies in China from 2010 to 2022, examining the relationship between perceptions of economic policy uncertainty and digital transformation.
Findings/results: The findings demonstrated that perceptions of economic policy uncertainty significantly hindered digital transformation, particularly affecting foundational technology transformation more than digital technology application transformation. Mechanism analysis identified financing challenges and managerial risk aversion as key pathways for this effect. In addition, a higher proportion of institutional investors and larger company size weakened the suppressive impact of economic policy uncertainty on digital transformation. Conversely, when financial institutions held shares, this uncertainty promoted digital transformation.
Practical implications: The study provides new insights and evidence for a deeper understanding of the relationship between economic policy uncertainty and digital transformation. This is particularly valuable for enterprises in formulating informed digital transformation decisions and for governments in crafting economic policies, especially in the face of high economic policy uncertainty.
Originality/value: Existing studies indicate that economic policy uncertainty may facilitate digital transformation but often neglect the financing challenges and risk issues faced by management during such periods. This study provides new evidence on the relationship between economic policy uncertainty and digital transformation, enhancing the exploration of how perceptions of this uncertainty influence transformation through the lenses of financing challenges and managerial risk aversion.