The impact and mechanism of the ‘Specialized and New’ policy on enterprise digital transformation – evidence from China

Digital transformation serves as a crucial foundation for enterprises to achieve business and trade digitisation, as well as to drive industrial upgrading and high-quality economic development. This paper explores the impact and mechanism of the 'Specialized and New' policy on enterprise digital transformation, utilising the policy established in 2019 as a quasi-natural experiment and leveraging data from China's A-share listed companies between 2017 and 2021. We employ difference-in-differences model to investigate the effects and underlying mechanisms of the 'Specialized and New' policy on digital transformation. Our results demonstrate that the 'Specialized and New' policy significantly promotes the process of enterprise digital transformation. Heterogeneity analysis reveals that the policy has a more pronounced effect on the digital transformation of non-state-owned enterprises, medium-sized enterprises, and enterprises with high management efficiency. In-depth mechanistic tests reveal that the 'Specialized and New' policy facilitates digital transformation through three pathways: enhancing research and development capabilities, introducing government subsidies, and reducing financing constraints. The policy is relatively new and less well researched, so the findings of this paper provide valuable insights and lessons for domestic and foreign policymakers, which can help in the replication of subsequent policies as well as the development and transformation of enterprises.