Does Internationalization Trigger Digitalization?

40 Pages Posted: 17 Oct 2023

See all articles by Yi Zhang

Yi Zhang

Xi'an Jiaotong University (XJTU) - Jinhe Center for Economic Research

Wei Xue

Xi'an Jiaotong University (XJTU)-Jinhe Center for Economic Research

Chun Liu

Southwestern University of Finance and Economics

Hein Roelfsema

Utrecht University

Date Written: September 21, 2023

Abstract

This study examines the connection between participation in international trade and digital transformation using a large dataset of Chinese listed firms. The results reveal that high-productivity firms, which are mainly engaged in higher value-added produc- tion, benefit from increased export intensity as it provides them with better opportuni- ties and stronger incentives for digital innovation. In contrast, it is found that interna- tionalization is negatively associated with digitalization for low-productivity firms that rely more on cheap labor rather than innovation. Various robustness checks, including the instrumental variable estimation, support these findings. Moreover, these effects are attributed to the market effect, the competition effect, and the learning effect iden- tified by an analysis of mechanisms. A further analysis on heterogeneity shows that international trade plays a more significant role in digital transformation when firms possess non-state ownership, experience high financial constraints, target developed export destinations, or engage in ordinary exporting.

Keywords: Internationalization, Digitalization, China

JEL Classification: F14, L86, O31

Suggested Citation

Zhang, Yi and Xue, Wei and Liu, Chun and Roelfsema, Hein, Does Internationalization Trigger Digitalization? (September 21, 2023). Available at SSRN: https://ssrn.com/abstract=4578651 or http://dx.doi.org/10.2139/ssrn.4578651

Yi Zhang

Xi'an Jiaotong University (XJTU) - Jinhe Center for Economic Research ( email )

Wei Xue

Xi'an Jiaotong University (XJTU)-Jinhe Center for Economic Research ( email )

26 Xianning W Rd.
Xi'an Jiao Tong University
Xi'an, Shaanxi 710049
China

Chun Liu (Contact Author)

Southwestern University of Finance and Economics ( email )

China

Hein Roelfsema

Utrecht University ( email )

Vredenburg 138
Utrecht, 3511 BG
Netherlands

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