ABSTRACT This study examines how digital transformation (DT) affects firms' internal incentive structures in China from 2010 to 2019. Unlike prior research, we assess firms' DT progress through participation in a nationwide DT certification program. Using a variety of empirical methods, we analyze how DT affects the compensation of both executives and workers, controlling for labor productivity, financial performance, and other firm characteristics. Our results indicate that: (i) DT significantly increases average worker compensation; (ii) this increase stems from compositional shifts toward hiring more skilled workers and creating additional non‐routine jobs; (iii) contrary to skill‐biased or routine‐biased technological change predictions, DT raises worker compensation without uniformly reducing low‐wage jobs in absolute terms; (iv) DT realigns incentive structures by linking corporate growth to executives' future compensation rather than current pay; and (v) DT reduces both the absolute and relative compensation gaps between executives and workers.
Duan et al. (Thu,) studied this question.