Local Politician Continuity and Firm Digital Transformation—Evidence from Listed Firms in China

In the midst of digital revolution,it is both critical and urgent to promote the digital transformation of Chinese firms,as they face numerous obstacles in this process.These include,for example,a lack of clear strategic goals and practical pathways,a scarcity of digital talent,and insufficient financial resources.Emerging market governments,as a crucial force in market operations,play a significant role in coordinating and allocating market resources,while providing policy support and guidance.However,we know little regarding how local politician continuity,a systemic setting and political phenomenon in China,affects firm digital transformation. Drawing on resource dependence theory,this study investigates the impact of local politician continuity on firm digital transformation.Politician continuity in a local area lowers uncertainty in public policymaking and resource allocation,thereby facilitating local firms’ digital transformation.Furthermore,firm specific characteristics and institutional factors determine the extent of firms’ resource dependence on the local government,thus moderating the aforementioned effect.Specifically,we focus on how the proportion of overseas revenue,research and development (R&D) investment,firm ownership,and local digital economy policies moderate the relationship between local politician continuity and firm digital transformation. The empirical setting is Chinese listed firms from 2010 to 2022.Firm-level data came from the CSMAR database,Wind database,and China Research Data Service Platform (CNRDS).Information of local politicians were from the personal resumes of local officials published on websites,such as People’s Daily Online,Xinhua Net,Zecheng Net,and Baidu Encyclopedia,and are supplemented by news reports and government websites to ensure the comprehensiveness and authenticity of the data.The names,birth dates,genders,educational backgrounds,places of origin,time of joining the CPC,first working time,time of taking office,time of leaving office,reasons for leaving office,and other information are manually collected.In addition,other relevant data at the city level,such as the city’s gross domestic product and local digital economy policy orientation,was sourced from the China Statistical Yearbook and the China Research Data Service Platform.The final sample covers a total of 29967 observations for 4499 companies,involving a total of 249 prefecture-level cities.To validate the hypotheses,this paper constructs a fixed-effect Tobit model.The core explanatory variables and control variables were lagged by one year to promote the construction of causal relationships. The study demonstrates that local politician continuity promotes digital transformation of firms within their jurisdictions.The proportion of overseas revenue and R&D intensity weaken the positive impact of local politician continuity while in state-owned firms,its impact gets more pronounced.Further,local digital economy policies weaken the effect of local politician continuity on firm digital transformation. Additional analyses show that local politician continuity has a greater positive impact on firm digital transformation in central affiliated state-owned firms than local affiliated ones; and there is no difference between officials’ internal and external promotion. Our study enriches the literature on politician continuity in two ways.①Based on resource dependence theory,we explicate how local politician continuity affects the digital transformation of firms within their jurisdictions.②We incorporate “central strategic objectives/local policy responses” into the theoretical framework of local politician continuity.We add to the emerging research on the antecedents of firm digitization transformation by providing a new perspective for understanding firms’ motivation for engaging in digital transformation.③By exploring the moderating effects of firm-level factors (i.e.,the proportion of overseas revenue and R&D investment) and institutional factors (i.e.,ownership and local digital economy policies),we demonstrate the importance of market strategies and institutional factors in managing non-market dependent relationships. The findings of this study provide valuable management and policy insights.For managers,it is essential to actively manage the potential risks related to local politicians.In response to the negative impact of frequent local personnel changes on digital transformation,they can adopt market-oriented strategies such as increasing investment in overseas markets and R&D.For state-owned enterprises and firms located in areas with less digital economy policies,more attention should be paid to potential changes in local officials and sufficient preparations should be made to mitigate the negative impact on digital transformation.For governments:Firstly,it is necessary to enhance the continuity and stability of local policies during the transition period to provide a stable and predictable businessenvironment.Secondly,the study found that compared to state-owned enterprises,private enterprises still face significant disadvantages in accessing government resources.Although reducing dependence on the government mitigates the positive impact of local official continuity on their digital transformation,local governments should fully consider the actual needs of private enterprises,allocate resources reasonably,and improve resource utilization efficiency.Thirdly, it is crucial to strengthen policy guidance for local development of the digital economy.By enhancing policy supply in areas such as promoting industrial digitization,digital infrastructure construction,digital resource integration,digital talent cultivation,and network and information security system construction,the impact of local officials on firm digital transformation can be mitigated.