How does competition policy affect enterprise digitization? Dual perspectives of digital commitment and digital innovation

Abstract

Competition policy profoundly impacts enterprise digitalization, yet it remains an underexplored area in previous work. Utilizing China’s Anti-Monopoly Law (AML) as a quasi-natural experiment, we investigate the impact of competition policy on firm digital commitment and digital innovation leveraging Chinese-listed company data from 2004 to 2020. The results demonstrate that for business exposed to AML, their digital commitment and digital innovation have achieved considerable enhancements. However, digitalization remains a strategic endeavor for some enterprises without substantial enhancements in digital innovation capacity. Dynamic effects document that while the short-term digitization effect of AML is prominent, there are long-term risks of failure. Moreover, the benefits are more pronounced in non-internet, state-owned enterprises, and enterprises in the growth and maturity stage. While compliance costs challenge enterprise digitization, AML mitigates it by curbing market power and facilitating talent mobility. Our findings provide valuable managerial insights for sustainable digitization performance by emphasizing establishing internal digital ethics guidelines, proactively embracing social responsibility, and promoting inter-enterprise collaboration.